August 24, 2018 - Appendix A-5: Real Estate Market Scan...

HR&A Advisors, Inc. Metro WSAB Transit Oriented Corridor TOD Strategic Implementation Plan | 1

Transit Oriented Development Strategic Implementation PlanContract No: PS36724000

Real Estate Market Scan100% DRAFT BRIEFING BOOK: August 24, 2018

(WITH REVISIONS REFLECTING NEW NORTHERN ALIGNMENTS)

Task 3.1.B

Developed by: HR&AAdvisors, Inc.

Presented by: City Design Studio

Presented to: Los Angeles County Metropolitan Transportation Authority


REAL ESTATE MARKET SCAN | Introduction

• As part of its work for the West Santa Ana Branch (“WSAB”) Transit

Corridor Transit-Oriented Development Strategic Implementation Plan, HR&A

Advisors, Inc. (“HR&A”) evaluated the real estate performance of retail, office,

industrial, and residential uses for key submarkets within the Corridor.

• The following document is designed to provide a base understanding of the

real estate market along the Corridor.

• It should be noted that HR&A focuses the analysis on the Corridor cities

outside of Downtown Los Angeles. While we need to understand the current

context of Downtown LA and the opportunities made possible by connections to

this major regional employment center, Downtown Los Angeles functions

very differently than the rest of the corridor, and the balance of the corridor

should be the focus as we prepare implementation strategies.


REAL ESTATE MARKET SCAN| Performance Metrics Defined

The following real estate metrics are used throughout this document.

Deliveries. Deliveries is defined as the new square footage of buildings that

completed construction during a specified period of time. In order for space to be

considered delivered, a completion certificate must have been issued for the

property.

Absorption. Absorption refers to the change in occupied space over a given period

of time. Positive absorption (shown as positive values) reflect positive changes in

occupancy (i.e., move ins). Negative absorption reflects all the negative changes in

occupancy (i.e., move outs).

Vacancy. A measurement expressed as a percentage of the total amount of

physically vacant space divided by the total amount of existing inventory. Vacant

space is defined as space that is not currently occupied by a tenant, regardless of

any lease obligation that may be on the space.


TABLE OF CONTENTS

Office Market

Retail Market

Industrial Market

Residential Market


OFFICE


Office Key Findings

Office Submarket Comparative Analysis

Office Submarket Characterization

Submarket 1: Downtown LA

Submarket 2: Vernon, Commerce, Central Alameda

Submarket 3: Maywood, Huntington Park, South Gate, Bell, Bell Gardens, Lynnwood,

Florence Graham, Walnut Park

Submarket 4: Paramount, Downey, Bellflower

Submarket 5: Cerritos, Artesia, Norwalk, Lakewood


Office | Market Overview

• Downtown LA is one of the largest employment centers in Southern California with almost

15% of LA County’s office space. Relative to the balance of the WSAB Corridor, Downtown LA

is a significant outlier in terms of office inventory and average rents.

• The suburban office cluster in Cerritos represents the second major office cluster in the

Corridor (though on a much smaller scale than DTLA) and Class A office there commands

higher rents and lower vacancy than the Corridor. Smaller office clusters exist scattered

throughout the Corridor, mainly along primary major arterials and near large medical centers.

• The vast majority of the office space outside of Downtown LA is concentrated in low-rise,

Class B and Class C buildings, mostly built between 1950-2000. Tenants are often local

professional services, public administration, and medical space.

• Within Downtown LA, office space deliveries have been partially driven by the rapid

conversion of industrial space into creative office space, much of which is located proximate

to the proposed WSAB alignment.

• Outside of DTLA, new office space is primarily medical office space. However, this medical

space tends to be clustered near key medical centers such as the Kaiser Permanente Center

in Downey and are not along the proposed WSAB alignment.


Office building class designation – Class A, B, or C - is a way of differentiating the

typology and quality of construction of buildings. Buildings with more expensive

construction cost and quality typically demand higher rents.

• Class A space is found more predominantly in Downtown LA. Throughout the Corridor, there is a wide range

of building conditions in Class B and Class C designated office buildings, which primarily appeal to price-

sensitive tenants. For the sake of this analysis, HR&A has consolidated these categories for the purposes of

estimating average rents and vacancies.

Description Typical Rents Typical Tenants Example Property

CLASS A

Typically, investment-grade property

with the highest quality construction,

materials and systems, significant

architectural features;

Top 30% - 40% in the

marketplace

Headquarters and

regional and national

professional services

companies

CLASS B

Offers more utilitarian space. Standard

architectural design and structural

features, with average interior finish,

systems, and floor plans, adequate

systems and overall condition.

Typically average

rents, but may be

more similar to Class A

or C rents depending

on condition.

Mixed tenant group,

typically depends on

prices to attract tenants

CLASS C

Often a no-frills, older building that

offers basic space. May offer baseline

maintenance, management, and

amenities

Typically the most

affordable rents.

Mixed tenant group,

typically depends on

prices to attract tenants

Source: CoStar

Low-Rise Office, Florence Ave. and

California Ave., Huntington Park

Standalone Class B Office, Paramount

Ave. and Jackson St., Paramount

Cerritos Towne Center, SR 91 and

Artesia Ave., Los Cerritos


Office Key Findings










20%

40%

40%54%

29%

18%

INVENTORY BY TYPE

There is approximately 67.9M SF of existing office space across the Corridor, which

HR&A has divided into 5 office submarkets based on market characteristics and existing

political, physical, and psychological boundaries.

SUBMARKET COMPARATIVE ANALYSIS | Inventory

710

110

91

105

SUBMARKET 1: Downtown Los Angeles

SUBMARKET 2: Vernon, Commerce

SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynwood

SUBMARKET 4: Downey,

Paramount, Bellflower

SUBMARKET 5:

Cerritos, Artesia,

Lakewood, Norwalk

1

2

5

3

4

605

KEY: OFFICE CLASS

Class B Class CClass A

TOTAL: 67.9 M SF

KEY: GROSS LEASABLE AREA

TOTAL:10.9 M SF

Corridor Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF

Greater than 750,000 SF

10,000 SF to 75,000 SF

Source: CoStar


8%

35%46%

8% 2%23%

27%40%

6%4%

INVENTORY BY TYPE

Approximately half of the Corridor’s office inventory was built after 1975. Pre-1950

office buildings are primarily mid-rise and high-rise buildings in Downtown LA and in

smaller office buildings in Submarkets 2 and 3.


710

110

91

105



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynwood



SUBMARKET 5:

Cerritos, Artesia,

Lakewood, Norwalk

1

2

5

3

4

605

KEY: OFFICE YEAR BUILT

1950-1975 1976-2000Pre 1950

CORRIDOR CORRIDOR

not incl. DTLA

2000-2017 Unavailable


Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar


Downtown LA is a major regional employment center in Southern California,

attracting thousands of daily commuters.

SUBMARKET COMPARATIVE ANALYSIS | Regional Employment Centers

LA COUNTY: EMPLOYMENT DENSITY (ALL JOBS)

DTLA

SANTA

MONICA

WILSHIRE

CORRIDOR

EL SEGUNDO/

PLAYA VISTA

SANTA

ANA

PASADENA

WSAB Study

Area

110

10

101

5

10

210

605

405

710


The core of HR&A’s analysis will focus on the market dynamics in Submarkets 2-5 and

how they compare to each other, given that Downtown LA is such a significant outlier in

terms of office market dynamics (e.g. inventory and rents) within the WSAB Corridor.

Source: CoStar

SUBMARKET COMPARATIVE ANALYSIS | 2016 Snapshot

SUBMARKET 5 Cerritos, Artesia, Lakewood, Norwalk

SUBMARKET 4Downey, Paramount, Bellflower

SUBMARKET 3Maywood, Huntington Park, South Gate,

Bell, Bell Gardens, Lynwood etc.

SUBMARKET 2Vernon, Commerce

SUBMARKET 1Downtown Los Angeles

CORRIDOR 67.92 M

CORRIDOR (not incl. DTLA) 10.89 M

LA COUNTY 412.23 M

Office Inventory

(2016, SF)

4.4 M

2.8 M

1.8 M

1.8 M

57.0 M



SUBMARKET 4*Downey, Paramount, Bellflower




SUBMARKET 1**Downtown Los Angeles

CORRIDOR 1.39 M

CORRIDOR (not incl. DTLA) 375K

LA COUNTY 18.4 M

161,000

172,000

38,000

5,000

There has been only 375,000 SF of new office developed along the Corridor, not

including DTLA. The primary source of new office space in the submarket was the

expansion of the Cerritos Towne Center, in Submarket 5.

Source: CoStar


Office Deliveries(2007-2016, SF)

1.0 M

*Note: Approximately half of this office space delivery is due to

the Iglesia de Cristo in Downey, which is not traditional office space.

**Hatched blue marks

represent scale breaks.


Nearly all of the Class A inventory is located in Submarket 1, which contains

Downtown LA, one of Southern California’s primary employment centers. Outside of

Downtown, Cerritos includes the majority of the Corridor's Class A space.

Source: CoStar


Average Rent

(2016, Gross)

Vacancy

(2016)

Class A

Inventory

(2016, SF)

*Note: Submarket 4 contains only two, small, Class A Office Buildings

Class A as %

of Submarket

(2016, SF)


1.57 M 35% $29.60 17.40%

SUBMARKET 4*Downey, Paramount, Bellflower

70K 2% $25.40 38.20%


Bell, Bell Gardens, Lynwood etc.- N/A N/A N/A


560K 31% $24.00 18.30%


33.92 M 59% $39.20 14.70%

CORRIDOR 36.12 M 53% $38.60 14.92%

CORRIDOR (not incl. DTLA) 2.19 M 20% $28.10 18.28%

LA COUNTY 177.78 M 43% $37.30 12.90%


Older, Class B and Class C office space is the dominant office typology in Submarkets

3 and 4. Rents and vacancy are low along the Corridor, not including DTLA, and are

significantly lower to averages for LA County.

Source: CoStar


Average Rent

(2016, Gross)

Vacancy

(2016)

Class B & C

Inventory

(2016, SF)

Class B & C as %

of Submarket

(2016, SF)


2.86 M 65% $23.50 7.40%


2.77 M 98% $24.40 3.50%


Bell, Bell Gardens, Lynwood etc.1.84 M 100% $30.10 5.90%


1.23 M 69% $21.80 11.70%


23.01 M 40% $34.10 14.60%

CORRIDOR 31.71 M 47% $31.40 12.36%

CORRIDOR (not incl. DTLA) 8.70 M 80% $25.00 6.45%

LA COUNTY 234.46 M 57% $30.80 8.60%


There are no proposed new significant office projects that have 100,000 SF or more

outside of Downtown LA. In DTLA, adaptive reuse projects in the Arts District, like ROW

DTLA, have potential to bring jobs near the new alignment.

SUBMARKET CHARACTERIZATION | Proposed Projects

ROW DTLA

• Developed by Runyon Group

• 30 acres, adaptive reuse of historic warehouses

• Plans for 1.3 M SF of office space, 200K ground floor

commercial space, and 5,000 parking spots.

• Opens 2018, located at future 7th and Alameda Station.

801 S Broadway

• Developed by Waterbridge Capital

• Adaptive reuse of historic Broadway Trade Center

• Plans for 400K SF of office space, boutique hotel and

retail space.

• Will open in 2018.

Flower Market Redevelopment

• Developed by Southern California Flower Market

• Ground up development on existing flower market site

• 78K SF of office, restaurant, and retail space; 64K SF of

wholesale and storage space; and 323 residential units

• Expected groundbreaking date unknown

Fourth & Traction

• Developed by Hudson Pacific Properties

• Adaptive reuse of Coca Cola Bottling Plant

• 120K SF of office and ground floor retail.

• Located in heart of Arts District

• Delivered in 2017

SELECT PROPOSED & UNDER CONSTRUCTION OFFICE PROJECTS

ROW DTLA, 7th Street and Alameda St., Los

Angeles

801 S Broadway, Financial District, Los

Angeles

Fourth & Traction, 963 E 4th Street, Arts

District, Los Angeles

Flower Market Redevelopment, 754 Wall

Street, Los Angeles


The Corridor contains a diversity of office typologies, including but not limited to, high-

rise office towers in Downtown LA, older standalone buildings and medical office space,

and more recent suburban office complexes to the southeast.

SUBMARKET COMPARATIVE ANALYSIS | Illustrative Typologies

710

110

91

105



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynwood



SUBMARKET 5:

Cerritos, Artesia,

Lakewood, Norwalk

605

A

B. Standalone Low-Rise Office, Florence Ave.

and California Ave., Huntington Park

A. High-Rise Office, 7th Street and Hope St.,

Downtown LA

C. Low Rise Medical Offices, Kaiser

Permanente, Bellflower Ave., Downey

D. Suburban Office Park, Towne Center Drive,

Cerritos Towne Center

D

C

B

ILLUSTRATIVE TYPOLOGIES


Office Key Findings










60%

26% 13%

20%

40%

40%

INVENTORY BY TYPE

Submarket 1 includes 57.0 M SF of office space, over five times the office space as the

rest of the Corridor combined. 60% of this space is Class A, representing a

substantially higher share compared to the rest of the Corridor.

SUBMARKET 1 | Inventory

KEY: OFFICE CLASS


TOTAL: 57.0 M SF


SUBMARKET 1: DOWNTOWN LOS ANGELES

5

10

TOTAL:10.9 M SF

Submarket Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar

UNION

STATION

ARTS DISTRICT

SOUTH

LITTLE TOKYO

4th Street

7th Street

SOUTH PARK /

FASHION DISTRICT


8%

35%

46%

8% 2%26%

25%

39%

5%5%

INVENTORY BY TYPE

The age of the office buildings in the submarket is comparatively older than the rest of

the submarket, and nearly 26% of the office space is contained in pre-1950 buildings.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


SUBMARKET CORRIDOR

not incl. DTLA

Source: CoStar


5

10

UNION

STATION

LITTLE TOKYO

4th Street

7th Street

ARTS DISTRICT

SOUTH

SOUTH PARK /

FASHION DISTRICT


DTLA saw high negative absorption from the recession until 2014. Recently, DTLA has

revitalized. In 2016 and 2017 respectively, the new Federal Courthouse and Wilshire

Grand have constituted the first major deliveries in over 20 years.

SUBMARKET 1 | Deliveries and Absorption

Source: CoStar

(1,400,000)

(1,200,000)

(1,000,000)

(800,000)

(600,000)

(400,000)

(200,000)

-

200,000

400,000

600,000

800,000

SF

Deliveries and Absorption – All Office Properties(2007-2016)

SF Delivered Net Absorption


Class A rents exceed those across LA County and the Corridor and are nearing $39

PSF annually. Vacancy is lower than LA County (13%), but is nonetheless high for a

central business district.*

SUBMARKET 1 | Rents and Vacancy

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, G

ross

Annu

al PSF

Class A Office Rent and Vacancy2007-2016

Submarket 1 Corridor (not incl. DTLA) LA County Submarket 1 Corridor (not incl. DTLA) LA County

Source: CoStar

*Other central business districts, such as New York City’s Financial District, Downtown San Diego, and Boston’s Financial District all have vacancy

rates that are below 10%.


Class B&C rents also exceed rents in LA County and the Corridor as a whole. Vacancy

is substantially higher than LA County, which may be due to the misconfiguration of older

buildings and the downsizing of office space per employee by traditional office users.


Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, N

NN

Annu

al PSF

Class B&C Office Rent and Vacancy2007-2016




5

10

Source: CoStar

UNION

STATION

ARTS DISTRICT

SOUTH

LITTLE TOKYO

4th Street

7th Street

SOUTH PARK /

FASHION DISTRICT

7TH STREET /

METRO

CENTER

PERSHING

SQUARE

Office typologies include older office buildings in the Financial District and South

Park (both renovated and non-renovated), smaller office buildings outside the CBD

and newly renovated creative office space in Little Tokyo and Arts District.

SUBMARKET 1 | Illustrative Typologies

C. Mid-Rise Office in Little Tokyo. East 2nd

Street, Los Angeles

D. Mid-Rise Office Flex Space in South

Park, E Olympic Blvd. and S Los Angeles St.,

Los Angeles

A. Wilshire Grand Class A Office, Wilshire

Blvd. and Figueroa St., Los Angeles

B. Pre-War Standalone Office Building, 700

Hill Street, Los Angeles


5

A

B

C

D


Office typologies include older office buildings in the Financial District (both

renovated and non-renovated), smaller office buildings outside the CBD and newly

renovated creative office space in Little Tokyo and Arts District.


• First new Class A skyscraper in Los Angeles since 1992,

includes office and hotel uses

• Opened in June 2017, 350,000 SF of office space

• Asking gross rents of $51 Annual PSF is highest in DTLA

• Key tenants are Cushman & Wakefield, Southern

California Association of Governors and Korean Air.

• Class C standalone building

• Built in 1927, 67,700 SF

• $30 PSF Annual Gross, 8% Vacancy

• Current tenants include national and local professional

services firms.

• Class B office building

• Built in 1984, 44,000 SF

• $30-$36 Annual Gross PSF, 18% Vacancy.

• Current tenants include an insurance company, an Asian

American non-profit and small businesses.

• Class C office building

• Built in 1958, 60,000 SF

• $26 Annual Gross PSF, 13% Vacancy

• Current tenants include local professional services firms.

ILLUSTRATIVE PROPERTIES

B. Pre-War Standalone Office Building, 700

Hill Street, Los Angeles

C. Mid-Rise Office in Little Tokyo. East 2nd

Street, Los Angeles

D. Mid-Rise Office Flex Space in South

Park, E Olympic Ave., Los Angeles

A. New Class A Office Building, Wilshire

Ave. and Figueroa St., Los Angeles


The DTLA office market has faced challenges over the last twenty years, but is

experiencing a resurgence. Rents increased significantly post-recession and surpassed

the LA County average, but vacancies remain high.

• The key office districts sit outside of the WSAB station areas, but

there are pockets of newly renovated creative office space near the

Little Tokyo and the Arts District stations, and the Fashion District

also contains some non-traditional office space.

• Although new office development has been limited, there is

substantial new development in the pipeline, including the proposed

Row DTLA, which calls for 1.3 million SF of new office and will be

immediately adjacent to the proposed station at 7th St. and Alameda

St. The abundance of older warehouse space near the station also

present many opportunities for reuse.

• Major proposed office projects in the Fashion District include the

redevelopment of the Norton Building and former Dearden’s

Building and the Southern California Flower Market redevelopment,

which suggest building momentum in this neighborhood for office.

• As office development activity shifts eastwards to the Arts District

(which has been traditionally underserved by high capacity transit)

WSAB will serve as a crucial link to allow commuters to better

access employment in DTLA.

SUBMARKET 1 | Key Findings

NORTON BUILDING, Fashion District, is

a proposed creative office building, part

of a proposed 250,000 SF office

campus.

ROW DTLA, Arts District, is a 30-acre

collection of industrial warehouses that

will be redeveloped for mixed uses.

MODEL PROPERTIES


Office Key Findings










31%47%

22%

20%

40%

40%

INVENTORY BY TYPE

Submarket 2 is home to only 1.8 M SF of office space, though this space tends be of

higher quality. Indeed, 30% of this space is Class A, representing a comparatively

higher share than the rest of the Corridor.


KEY: OFFICE CLASS


TOTAL: 1.8 M SF


WASHINGTON

60

5

710

10

TOTAL:10.9 M SF

Submarket Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar

S S

anta

Fe A

ve.

VERNON

SLAUSON

SUBMARKET 2: VERNON, COMMERCE


8%

35%

46%

8% 2%

14%

37%

44%

4% 1%

INVENTORY BY TYPE

The age of the office buildings in the submarket mirror the development patterns across

the Corridor. Most office buildings in submarket were built from 1950-2000. More

recent development has occurred in Commerce Corporate Center.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


SUBMARKET CORRIDOR

not incl. DTLA

WASHINGTON

60

5

710

10

S S

anta

Fe A

ve.

VERNON

SLAUSON


Source: CoStar


The Submarket has seen less than 10,000 SF of office delivered in the last ten years.

Absorption patterns have been mainly steady over the last ten years, aside from the loss

of major tenants at the Commerce Corporate Center in 2016.


Source: CoStar

(140,000)

(120,000)

(100,000)

(80,000)

(60,000)

(40,000)

(20,000)

-

20,000

40,000

SF




Class A rents have not recovered since the recession. Vacancy is high reflects

weakness at the Commerce Corporate Center, which represents the bulk of the Class A

space in the market.


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, G

ross

Annu

al PSF



Source: CoStar


Class B&C rents and vacancy in Submarket 2 have stagnated since the recession, and

have not kept up with growth in LA County. Vacancy has also risen and is substantially

higher than LA County.


Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, N

NN

Annu

al PSF




Office typologies include standalone offices on major arterials such as Santa Fe Ave.

and Vernon Ave., as well as a cluster of Class A and Class B office parks at the

Commerce Corporate Center on Eastern Ave.


C. Modern Class A Office at Commerce

Corporate Center. Eastern Ave., Commerce

D. Office in a Strip Center, Eastern Ave.,

Commerce

A. Standalone Office, Santa Fe Ave., Los

Angeles

B. Standalone Office Building, E Vernon

Ave. and Hooper Ave., Los Angeles


WASHINGTON

60

5

710

10

Source: CoStar

S S

anta

Fe A

ve.

VERNON

SLAUSON



The office inventory primarily consists of low-rise and mid-rise Class B and C medical

and professional services buildings. The Class A cluster at Commerce Corporate Center

suffers from low rents and high vacancy compared to the overall market for such space.



• Built in 1914, 3,000 SF

• Fully Leased

• Key tenant is a sewing supply company

• Class B standalone building

• Built in 1954, 7,700 SF

• Fully Leased

• Office for warehousing / manufacturing

• Class A office building

• Built in 1974, renovated in 1997, 70,000 SF

• $25-$27 Annual Gross PSF, 24% Vacancy.

• Current tenants include PIASC, Bank of America, and

professional services companies.

• Class C medical building

• Built in 1985, 18,000 SF

• $16.20 Annual Gross PSF, 22% Vacancy

• Current tenants include a local printing company, a

workforce agency and a credit union.


A. Standalone Office, Santa Fe Ave., Los

Angeles

B. Standalone Office Building, E Vernon

Ave. and Hooper Ave., Los Angeles

C. Modern Class A Office at Commerce

Corporate Center. Eastern Ave., Commerce

D. Office in a Strip Center, Eastern Ave.,

Commerce


Submarket 2 office market is stagnant, and has seen no development in the last

fifteen years. Rents and vacancy are low, however, indicating demand amongst price

sensitive tenants. The small cluster of Class A office space is underperforming.

• There is a greater focus on industrial space, rather than office, in this

submarket. City officials maintain that warehousing and manufacturing

jobs are the current priorities for the large portfolio of existing

industrial space.

• Vacancy in Class B and C office space has been historically low,

indicating that the office product and cost was in line with the current

market demand.

• There is little office space within the proposed WSAB station areas.

The few office buildings that exist in the areas are primarily low-rise,

local professional services, offices for manufacturing and distribution

services and medical office space. Some storefront offices show signs

of disinvestment.

• New office development has been non-existent, but there are

indications that increased demand in the Arts District may result in

some adaptive reuse projects south of the I-10, including artist lofts

or larger building reuse projects.


COMMERCE CORPORATE CENTER

represents a cluster of high quality, but

underperforming office space.

FORMER SUDDUTH FACTORY, 1700 S

Santa Fe, is a former factory being

marketed for creative office space.

MODEL PROPERTIES


Office Key Findings










36%

64%

20%

40%

40%

INVENTORY BY TYPE

Submarket 3 is home to 1.9 M SF of office space, primarily Class B and C office

buildings which show signs of disinvestment. Office space is clustered along major

arterials and often include medical local professionals.


KEY: OFFICE CLASS


TOTAL: 1.9 M SF


FIRESTONE

FLORENCE/

SALT LAKE

605

5

Imperial Hwy.105

TOTAL: 10.9 M SF

Submarket Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar

SUBMARKET 3: SOUTH GATE, HUNTINGTON PARK, BELL

PACIFIC/

RANDOLPH


8%

35%

46%

8% 2%23%

42%

26%

3% 5%

INVENTORY BY TYPE

The inventory of office buildings in the submarket is comparatively older than the

Corridor – over 60% of buildings were built before 1975. The cluster of medical

office space near St. Francis Medical Center in Lynwood was built more recently.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950



SUBMARKET CORRIDOR

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar

FIRESTONE

FLORENCE/

SALT LAKE

605

5

Imperial Hwy.105


PACIFIC/

RANDOLPH


Submarket 3 has seen less than 50,000 SF of office delivery in the last ten years. The

few deliveries have been driven by low-rise medical space.

SUBMARKET 3| Deliveries and Absorption

(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

80,000

100,000

SF


SF Delivered Net AbsorptionSource: CoStar


Class B & C rents in Submarket 3 are comparable to rents in LA County and higher than

the Corridor overall (not incl. DTLA). Gross rents have seen moderate growth over the

last ten years. Occupancy is strong, as well.


*Note: HR&A used LA County growth rate to calculate 2016 rents to account for inadequate data.

*

Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, N

NN

Annu

al PSF




FIRESTONE

FLORENCE/

SALT LAKE

605

5

Imperial Hwy.105


PACIFIC/

RANDOLPH

Office typologies include older storefront and standalone offices located near Pacific

Blvd., and along major arterials, and more recent medical office space, such as near

Saint Francis Medical Center.


A

D

C

B

A. Strip Center Office, Pacific Ave. and

Slauson Ave., Huntington Park

B. Standalone Medical Space, 3310

Firestone Ave., South Gate

C. Lynwood Medical Plaza, Imperial Hwy

and MLK Jr Ave., Lynwood

D. Single Story Standalone Office, 6443

Florence Ave., Bell Gardens



The office inventory is composed of low-rise and mid-rise Class B and C medical and

professional services buildings.


B. Standalone Medical Space, 3310

Firestone Ave., South Gate

C. Lynwood Medical Plaza, Imperial Hwy.

and MLK Jr. Ave., Lynwood

D. Single Story Standalone Office, 6443

Florence Ave., Bell Gardens

A. Strip Center Office, Pacific Ave. and

Slauson Ave., Huntington Park


• Built in 1949, 10,000 SF

• $25.20 Annual NNN PSF, 50% Vacancy

• Key tenants include a temp agency, a medical records

storage center and a health clinic.

• Class C standalone medical office building

• Built in 1925

• 1,800 SF of medical space

• $18.00 Annual PSF NNN, 100% Vacancy

• Class B medical office building near St. Francis Hospital

• Built in 1994, 55,000 SF

• $36.00 Annual Gross PSF, 25% Vacancy.

• Current tenants include the Maternal Fetal Diagnostic

Center, Oncology Institute of Hope and Innovation.

• Class C low-rise office building with surface parking

• Built in 1990, 3,000 SF

• $13.20 Annual Modified Gross PSF, 33% Vacancy

• Current tenants include local financial, accounting and

legal services.



Submarket 3 office space is stable, but has seen little development. Low vacancy

indicates market support for current Class B & C product but the market may lack

support for new, higher quality office product.

• Submarket 3 is a local serving office market. The office space

throughout the Corridor, as well as in the WSAB station areas is

primarily low-rise, local professional services and medical office space

serving the local community. Some storefront offices show signs of

disinvestment.

• Rents for Class B and C office space have seen strong growth in the

past ten years, though Class C rents still lag LA County.

• Vacancy in Class B and C office space is low, indicating that the

office product and costs is in line with the current market demand.

• There has been no large scale office development in the last 10

years, aside small scale low-rise office space, such as near the St.

Francis Medical Center.


INSURANCE OFFICE, Bellflower, is an

example of neighborhood office along

the revitalized Bellflower Ave. corridor.

DAVITA DIALYSIS, Lynwood, is a

dialysis center near St. Francis Medical

Ctr. recently built in 2009.

MODEL PROPERTIES


Office Key Findings










2%

37%

60%

20%

40%

40%

INVENTORY BY TYPE

Submarket 4 is home to 2.8 M SF of office space, but it is of comparatively lower

quality than the rest of the Corridor. There is little Class A office space, which has

generally underperformed compared to LA County.


KEY: OFFICE CLASS


TOTAL: 2.8 M SF


SUBMARKET 4: PARAMOUNT, DOWNEY, BELLFLOWER

BELLFLOWER

605

5

Rosecrans Ave.

105I-105/ GREEN

LINE

GARDENDALE

710

PARAMOUNT/

ROSECRANS

Alondra Blvd.

TOTAL:10.9 M SF

Submarket Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar


8%

35%

46%

8% 2%

5%

56%

27%

9%

2%

INVENTORY BY TYPE

Most office buildings in submarket were built from 1950-1975. More recent

development has occurred in downtown Downey.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950



SUBMARKET CORRIDOR

not incl. DTLA


BELLFLOWER

605

5

Rosecrans Ave

105I-105/ GREEN

LINE

GARDENDALE

710

PARAMOUNT/

ROSECRANS

Alondra Blvd. Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar


New office space delivery has been limited, though absorption has ticked up in the past

five years.*


(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

80,000

100,000

SF



*The construction of the 80K SF Iglesia De Cristo in Downey in 2012 was classified as

office space, but was not considered as part of the office market for this analysis.Source: CoStar


There are only two Class A properties in the submarket, one of which sits vacant

(newly renovated creative office at Downey Promenade). Rents and vacancy here are

weaker than those across the Corridor.


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, G

ross

Annu

al PSF



Source: CoStar *Limited sample size of properties can lead to variations in data accuracy


Class B&C rents and vacancy in Submarket 4 have stagnated since the recession, but

have inched closer to rents in LA County in recent years. Vacancy for these properties is

low and is likely driven by tenants seeking affordable rents.


Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, N

NN

Annu

al PSF




Office typologies include standalone buildings for professional services such as in

Downtown Downey and older low-rise along major arterials such as Paramount Blvd.

A newly renovated creative office space in Downey has met tepid market response.


A. Downtown Downey Plaza, Downey Ave.

and Firestone Ave., Downey

B. Standalone Two-Story Office, Paramount


C. Low-Rise Office and Banking Center,

Bellflower Ave. and Maple St., Bellflower


BELLFLOWER

A

605

5

B

D

Rosecrans Ave

105I-105/ GREEN

LINE

GARDENDALE

710

C

PARAMOUNT/

ROSECRANS

Alondra Blvd.

D. Creative Offices in former NASA

building, Downey Promenade, Downey

Bellflo

wer B

lvd.



Class A space in the submarket is limited to two buildings. Aside from standalone

office for local professional service firms, there is also an abundance of medical offices,

particularly near Promise Hospital and Kaiser Permanente Downey Medical Center.


B. Standalone Two-Story Office, Paramount


C. Low-Rise Office and Banking Center,

Bellflower Ave. and Maple St., Bellflower

D. Creative Offices in former NASA

building, Downey Promenade, Downey

A. Downtown Downey Plaza, Downey Ave.

and Firestone Ave., Downey

• Class A office building

• Built in 1986, 46,000 SF of office space, in a standalone

office building with on site surface parking

• $28.30 Annual Gross PSF, fully leased.

• Key tenants include Wells Fargo Bank, Bergener &

Associates, and Keller Williams Realty.

• Class B standalone medical office building, across the

street from Promise Hospital of East LA

• Built in 1986, 22,000 SF of office space, in a standalone

office building with on site surface parking.

• $19.00 Annual PSF Gross, 74% Vacancy

• Current tenants include primarily medical offices.

• Low-rise Class C bank building

• Built in1953, 8,150 SF

• Rent withheld, fully leased.

• Current tenant and owner is Bank of the West.

• Low-rise creative office building, repositioned as part of

the Downey Promenade development.

• Built in 1968, renovated in 2016, 23,100 SF

• Rents withheld, 100% Vacancy

• Built in 1968, renovated in 2016



The market for office space in the Submarket is mainly driven by local professional

services and medical space. Much of the growth in Submarket 4 is occurring in Downey,

away from planned station areas.

• Submarket 4 is a local serving office market. Most of the office

space is primarily low-rise, local professional services and medical

office space serving the local community.

• Rents for Class B and C office space have grown since the

recession, but have seen stagnant growth overall in the past ten

years. Class A space is limited to 2 buildings totaling 70K, one of

which is completely vacant. New office development has been driven

by medical office space, especially in Downey, but not in locations that

are proximate to the proposed WSAB alignment.

• In the Gardendale Station, the County courthouse could attract office

users who desire proximity to civic uses.

• Large, underutilized lots at the Paramount/Rosecrans Station present

an opportunity for redevelopment with some office space.

• The office space near the Bellflower station consists of mainly

neighborhood focused storefront office space, which could benefit

from enhanced regional access that the rail line would provide.


KAISER PERMANENTE SATELLITE

OFFICES, Bellflower, is a medical office

building located near the KP hospital.

DOWNEY DENTAL GROUP, Downey, is a

recently built orthodontist office near

Downtown Downey.

MODEL PROPERTIES


Office Key Findings










35%40%

24%

20%

40%

40%

INVENTORY BY TYPE

Submarket 5 is home to 4.4 M SF of office space. 35% of this space is Class A,

representing a comparatively higher share than the rest of the Corridor. Office space is

clustered near freeways and some major arterials.


KEY: OFFICE CLASS


TOTAL: 4.4 M SF


SUBMARKET 5: CERRITOS, ARTESIA, LAKEWOOD, NORWALK

PIONEER

GRIDLEY/

183RD

Del Amo Blvd

605

91

Alondra Blvd.

South St.

Rosecrans Ave.

5TOTAL:10.9 M SF

Submarket Corridor,

not incl. DTLA

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar


8%

35%

46%

8% 2%

2%

18%

68%

11%

1%

INVENTORY BY TYPE

The inventory of office buildings in submarket is comparatively more recent than the

Corridor. 68% of the buildings were built between 1975-2000.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950




PIONEER

GRIDLEY/

183RD

Del Amo Blvd

91

Alondra Blvd.

South St.

Rosecrans Ave.

SUBMARKET 5 CORRIDOR

not incl. DTLA605

5

Less than 10,000 SF

75,000 to 200,000 SF200,000 to 750,000 SF


10,000 SF to 75,000 SF

Source: CoStar


There has been little new office development in this submarket aside from the expansion

of the Cerritos Towne Center in 2009.

SUBMARKET 5 | Deliveries and Absorptions

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF


SF Delivered Net AbsorptionSource: CoStar


Class A rents in Submarket 5 are stronger than those across the Corridor (nearly $30

PSF), but have historically lagged the rent patterns of LA County. Vacancy is high, even

compared to LA County or DTLA.


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, G

ross

Annu

al PSF



Source: CoStar


Class B&C rents and vacancy in Submarket 5 have stayed low since the recession.

Vacancy is low, however, indicating demand for low cost office space.


Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent, N

NN

Annu

al PSF




Office typologies include suburban business parks such as at Cerritos Towne Center,

with older offices along major arterials, and near the Los Cerritos and Lakewood

malls. The bulk of Class A office is in Cerritos.



PIONEER

GRIDLEY/

183RD

Del Amo Blvd

South St.

Rosecrans Ave.

C. Low-Rise Office along Pioneer Ave.,

Artesia

D. Medical Office Space, Clark Ave. and

Candlewood St., Lakewood

A. Cerritos Towne Center, SR 91 and Artesia

Ave., Los Cerritos

A

91

B 605

5

C

Alondra Blvd.

D

B. Office / Residential Building, Rosecrans

Ave. and Jersey Ave., Norwalk



Class A spaces are generally occupied by professional services firms that can afford

higher rents, like law firms. There is also an abundance of Class B & C medical offices,

which achieve lower rents but also generally maintain low vacancy.


Office / residential building, Rosecrans Ave.

and Jersey Ave., Norwalk

Low-Rise Office along Pioneer Ave., Artesia

Medical Office Space, Clark Ave. and

Candlewood St., Lakewood

Cerritos Towne Center, SR 91 and Artesia

Ave., Los Cerritos

• Suburban Class A and B office park

• Built in stages between 1989 and 2009, 700K SF of office

space, in a master planned 124 acre development

• $34.20 Annual NNN PSF, 12.5% Vacancy

• Key tenants include local professional services firms

including Kling and Pathak LLP, and Keller Williams Realty.

• Mixed-use Class C office/ residential building

• 4,000 SF


• Built in 1960

• Current tenants include local medical offices.

• Low-rise Class C medical building

• Built in 1958, 5,500 SF

• Rent withheld, 0% Vacancy, nearby rents are between

$15-$20 PSF annually.

• Current tenant is local dentist.

• Two-story Class C medical building

• Built in 1981, 36,480 SF


• Key tenants include a local credit union and local medical

offices.



Not including DTLA, Submarket 5, especially Cerritos, contains the highest performing

office space and over 70% of the Class A space in the Corridor. Average rents are

higher than the Corridor, but lag average rents for LA County.

• Gross rents for Class A and Class B&C office space fell during the

recession, but have since exceeded pre-recession rents.

• New office development has been driven by expansion at the

Cerritos Towne Center, which opened a new 100,000 SF Class A

building in 2009.

• The key office developments near the WSAB alignment includes a

cluster along Pioneer Blvd. and near the Los Cerritos Mall (primarily

low-rise and mid-rise buildings for professional services and medical

space).

• The proposed WSAB station areas in Submarket 5 are not proximate

to many of the key office properties like the Cerritos Towne Center

and would require a last-mile strategy to feel significant benefit from

the introduction of the proposed rail line. However, the existing

neighborhood serving office could benefit from regional transit access.

SUBMARKET 5| Key Findings

CERRITOS TOWNE CENTER, Cerritos, is

an expanding suburban office park.

MEDPOST URGENT CARE, Cerritos, is a

recently renovated urgent-care center at

the Cerritos Plaza.

MODEL PROPERTIES


RETAIL


Retail Key Findings

Retail Submarket Comparative Analysis

Retail Submarket Characterization








Retail | Market Overview

• The key nodes of high performing retail include Downtown Los Angeles, Downey, and the

Los Cerritos Mall area. These areas serve as regional shopping destinations.

• DTLA is a fashion and food hub and contains the Fashion District, which draws in people from

around the Southern California region to its wholesale and discount clothing stores. Downey is

growing as a prominent retail destination, and attracts shoppers interested in its large mall,

new power centers, and its coveted Porto’s Bakery. Cerritos is a major regional shopping

center destination, anchored by the prominent Los Cerritos Mall

• The largest share of new retail space has been delivered in Submarket 1, spurred by the

resurgence of Downtown LA as a live/work/play destination.

• Between Downtown Los Angeles and Downey, there is a glut of underperforming retail.

Despite existing retail dynamics, there is evidence that these areas are able to support

additional, higher-quality retailers, as newer developments in South Gate demonstrate.

• Several exciting or new retail developments outside of Downtown LA are positioned to

target Hispanic shoppers, such as the new Azalea Shopping Center in South Gate, Plaza

Mexico in Lynwood, and El Faro Plaza in Central Alameda.


Retail | Key Opportunities

HR&A has identified several key opportunities for retail near the future West Santa Ana Branch

station areas, including:

• A new retail hub at the Arts District or 7th/Alameda Stations. The expected residential and

commercial growth in the Arts District, as well as the ROW DTLA large scale commercial

redevelopment could anchor a new mixed-use hub near the station.

• Traditional nodes of Hispanic retail at Vernon and Pacific/ Randolph Stations. El Faro Plaza

and the Alameda Swap Meet, as well as El Corido on Pacific Blvd., respectively, are existing

retail hubs for the regional community. Transit investment may help strengthen these nodes and

allow more shoppers in the Gateway cities to access these hubs.

• A modern, TOD retail node at Firestone. The early success of the Azalea Shopping Center

adjacent to the future Firestone Station provides promising signs for the planned TOD district.

• More accessibility to main-street retail at Bellflower. New transit could help speed up the

revitalization of Bellflower Blvd. as a main street shopping node.

• The proposed terminus can strengthen the Cerritos/Artesia regional shopping destination.

The super regional Los Cerritos Mall has made the city a regional shopping draw. Transit could

aid mixed use development nearby and increase vibrancy of the Little India shopping hub.


Retail Key Findings










INVENTORY BY TYPE

There is approximately 55.6 M SF of existing retail space across the Corridor, which HR&A has

divided into 5 retail submarkets based on market characteristics and existing political, physical,

and psychological boundaries.


710

110

91



1

2

5

3

4

605

KEY: RETAIL TYPOLOGY

Neighborhood

Center

Community

Center

Lifestyle/Power Regional

MallOutlet/

Theme

Strip

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF

General

Retail

9%

54%6%

12%

2%

8%

8%

TOTAL: 55.6 M SF


Note: General Retail is not shown on the above map, but is included in the retail inventory chart.

11%

44%

8%

15%10%

11%


Corridor Corridor,

not incl. DTLA

TOTAL: 40.9 M SFSUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynwood



SUBMARKET 5:

Cerritos, Artesia,

Lakewood, Norwalk

Source: CoStar


25%

34%

25%

15%

19%

42%

27%

12%

Much of the inventory for the Corridor (not including DTLA) was built pre-1975, including

the largest regional shopping centers such as the Los Cerritos Mall, Stonewood Center

and Lakewood Center.


710

110

91



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynwood



SUBMARKET 5:

Cerritos, Artesia,

Lakewood, Norwalk

1

2

5

3

4

605

Note: General Retail is not shown on the above map, but is included in the retail inventory chart.

CORRIDOR,

not incl. DTLA

INVENTORY BY AGE

KEY: RETAIL AGE

1950-1975 1976-2000Pre 1950


CORRIDOR


Submarket 5 is a significant regional shopping destination and contains the highest

amount of retail inventory across the Corridor, whereas Submarket 2 contains very little

retail.

Source: CoStar








CORRIDOR 55.64 M


LA COUNTY 434.83 M

Retail Inventory

(2016, SF)

16.05 M

10.54 M

12.02 M

2.25 M

14.77 M


HR&A’s analysis will focus on the market dynamics in Submarkets 2-5 and how they

compare to each other, given that much of DTLA’s retail is a specialty offering and is a

significant outlier in terms of retail market dynamics (e.g. inventory type, asking rents).

Source: CoStar








CORRIDOR 55.64 M


LA COUNTY 434.83 M

Retail Inventory

(2016, SF)

16.05 M

10.54 M

12.02 M

2.25 M

14.77 M


The Corridor has seen an influx of nearly 2.6 million SF of new retail space over the

last ten years, or 11% of new deliveries in LA County, outside of DTLA. Deliveries

have particularly strong in Submarket 4, amidst the opening of new shopping centers.

Source: CoStar








CORRIDOR 4.79 M


LA COUNTY 23.80 M

Retail Deliveries

(2007-2016, SF)

2.21 M

44.27 K

0.88 M

1.09 M

0.56 M


HR&A has sorted the retail along the Corridor into general and shopping center

retail categories per industry-standard classifications.

DescriptionTypical Gross Leasing

AreaTypical Anchor Tenants

GENERAL RETAIL Typically, a single-tenant general purpose commercial-retail

building that is free standing.

<10,000 (though some big

box retailers can sometimes

be included in the category)

N/A, typical tenants can be

restaurants, clothing, general

merchandise.

STRIP Also referred to as “strip center.” Attached row of stores or

service outlets managed as a coherent retail entity, with on-

site parking usually located in front of the stores.

< 30,000 Convenience store, such as a

mini-mart.

NEIGHBORHOOD

CENTER

Convenience oriented row of stores and service outlets, but

larger than Strip centers.

30,000 - 125,000 Supermarket

COMMUNITY CENTER General merchandise or convenience- oriented offerings.

Wider range of apparel and other soft goods offerings than

neighborhood centers

125,000 - 400,000 Supermarket, drug, large-

specialty discount

LIFESTYLE / POWER Category-dominant anchors collocated with only a few small

tenants. Sometimes includes upscale national-chain specialty

stores.

150,000 - 500,000 Category killers, such as home

improvement, and warehouse

club.

REGIONAL MALL General merchandise or fashion-oriented offerings. Typically

enclosed with inward-facing stores connected by a walkway.

<400,000 Department store, mass

merchant or fashion apparel

store.

OUTLET/ THEME Manufacturers' and retailers' outlet stores at a discount, and

tourist, retail and service-oriented offerings with

entertainment as a unifying theme.

50,000 - 400,000 Manufacturers' and retailers'

outlets

Source: Appraisal Institute, CoStar



$21.10 4.90%


$26.60 5.20%


Bell, Bell Gardens, Lynwood etc.$21.90 3.50%


$17.80 22.40%


$44.80 6.10%

CORRIDOR 26.49 M $23.90 5.32%

CORRIDOR (not incl. DTLA) 23.41 M $21.50 5.22%

LA COUNTY 209.23 M $26.00 4.50%

Nearly half of shopping center inventory is located in Submarket 5, which contains

the Los Cerritos and Lakewood malls. Shopping center rents are stronger than non-

shopping center rents across the Corridor.

Source: CoStar


3.08 M

0.76 M

5.40 M

6.41 M

10.84 M

Average Rent

(2016, NNN)*

Vacancy

(2016)

Shopping Center

Retail Inventory

(2016, SF)

*In a triple net lease (or NNN), the tenant or lessee agrees to pay all real estate taxes, building insurance,

and maintenance in addition to regular fees such as rent and utilities.



$18.60 8.80%


$17.20 3.50%


Bell, Bell Gardens, Lynwood etc.$17.40 3.20%


$23.30 1.30%


$32.70 5.40%

CORRIDOR 29.15 M $22.80 5.04%

CORRIDOR (not incl. DTLA) 17.46 M $17.30 4.77%

LA COUNTY 225.60 M $33.50 3.30%

11.69 M

1.49 M

6.62 M

4.14 M

5.21 M

Retail rents for non-shopping center retail, which includes standalone and storefront

retail, are 15% - 50% cheaper than shopping center rents across the Corridor.

Source: CoStar


Average Rent

(2016, NNN)*

Vacancy

(2016)

Non-Shopping Center

Retail Inventory(2016, SF)

*In a triple net lease (or NNN), the tenant or lessee agrees to pay all real estate taxes, building insurance,

and maintenance in addition to regular fees such as rent and utilities.


Taxable retail sales per capita along the Corridor are below LA County, aside from in

the cities located in Submarket 5, containing several regional malls. Cities in Submarket

3 have low sales, indicating underperforming and limited retail.

Source: California Board of Equalization, 2016. Taxable retail sales are not available on a neighborhood level. Per capita sales in the submarkets is

based on citywide retail sales.

*HR&A anticipates that the retail sales per capita for DTLA is significantly higher, given the low population in the area and high retail density.

SUBMARKET COMPARATIVE ANALYSIS | Retail Sales Per Capita

$11,405$10,428

$4,616

$10,367

$19,239

Retail Sales Per Capita (2015, $)

LA County

$15,142

SUBMARKET 1:City of Los Angeles*

SUBMARKET 2:City of Vernon,

(including. pop of

Central Alameda)

SUBMARKET 4:Cities of Downey,


SUBMARKET 5:Cities of Cerritos,

Artesia, Lakewood,

Norwalk

SUBMARKET 3:Cities of Bell, Bell

Gardens, Huntington

Park, Maywood,

Cudahy, South Gate


85

10 15

26

38

Shopping Center Retail SF Per Capita

Submarket 2-3 have rates of retail per capita lower than LA County. Submarkets 4

and 5 serve as regional shopping center hubs and include the Stonewood Center,

Lakewood Center and Los Cerritos Mall.

SUBMARKET COMPARATIVE ANALYSIS | Retail Square Footage Per Capita

21, LA County

Source: CoStar, ACS Census 2010-2014

SUBMARKET 1:Downtown Los Angeles

SUBMARKET 2:Vernon, Commerce

SUBMARKET 3:Bell, Huntington Park,

Cudahy, Maywood,

Bell Gardens, South

Gate, Walnut Park,

Florence Graham

SUBMARKET 4:Downey, Paramount,

Bellflower

SUBMARKET 5:Cerritos, Artesia,

Lakewood, Norwalk


324

20 18 17 18

Non-Shopping Center Retail SF Per Capita

Non-shopping center retail per capita is lower across the Corridor, compared to LA

County across the Corridor. DTLA is a substantial outlier due to the presence of the street

front retail in the Fashion and Toy Districts and DTLA’s relatively low resident population.

SUBMARKET COMPARATIVE ANALYSIS | Retail Square Footage Per Capita

23, LA County

Source: CoStar, ACS Census 2010-2014

SUBMARKET 1:Downtown Los Angeles

SUBMARKET 2:Vernon, Commerce

SUBMARKET 3:Bell, Huntington Park,

Cudahy, Maywood,

Bell Gardens, South

Gate, Walnut Park,

Florence Graham

SUBMARKET 4:Downey, Paramount,

Bellflower

SUBMARKET 5:Cerritos, Artesia,

Lakewood, Norwalk


DEMAND CURRENT SALES

Retail TypeResident Spending

PotentialCurrent Sales

Auto Parts, Accessories, & Tire Stores $133 M $212 M

Furniture & Home Furnishings Stores $175 M $449 M

Electronics & Appliance Stores $277 M $421 M

Bldg Materials, Garden Equip. &

Supply Stores$403 M $673 M

Grocery Stores $1,051 M $1,553 M

Specialty Food Stores $88 M $528 M

Beer, Wine & Liquor Stores $89 M $109 M

Health & Personal Care Stores $498 M $724 M

Clothing & Clothing Accessories $559 M $1,372 M

Sporting Goods, Hobby, Book &

Music Stores$246 M $420 M

General Merchandise Stores $1,267 M $1,897 M

Miscellaneous Store Retailers $162 M $281 M

Special Food Services $15 M $10 M

Drinking Places – Alcohol $17 M $13 M

Restaurants/Other Eating Places $784 M $1,185 M

TOTAL $5,765 M $9,848 M

By comparing resident spending potential and current sales in the Corridor, our retail

gap analysis indicates that existing retail in the Corridor, on average, is able to draw

shoppers from beyond the study areas.

SUBMARKET COMPARATIVE ANALYSIS | Retail Gap Analysis

Source: ESRI Business Analyst

• Retail spending exceeds

resident spending potential,

therefore retail must be

supported by patrons outside

of the corridor.

• Although retail sales currently

exceed resident spending

potential as a whole, there

may still be potential for new

offerings in certain areas.

• In a crowded retail

environment, new retail should

be differentiated to be

successful.

FINDINGS


There is little new retail being proposed and built across the Corridor, aside from DTLA.

Large scale retail developments include ROW DTLA and Oceanwide Plaza.

SUBMARKET COMPARATIVE ANALYSIS | Proposed Projects

ROW DTLA

• Developed by Runyon Group

• 30 acres, adaptive reuse of historic warehouses

• Plans for 200K ground floor commercial space, incl. a

food hall, 1.3 M SF of office space.

• Opens 2018, located at future 7th and Alameda Station.

Artesia Live

• Developed by Cornerstone

• New mixed-use development on a former strip shopping

center

• Plans for ground floor retail in a 250K SF (total) building

• Unclear opening date.

Oceanwide Plaza

• Developed by Oceanwide Holdings

• $1 Billion multi-use project including 150K retail space,

as well as luxury condominiums and a Park Hyatt hotel.

• Located across from Staple Center

• To be delivered in 2018.

SELECT PROPOSED & UNDER CONSTRUCTION PROJECTS

ROW DTLA, 7th Street and Alameda St., Los

Angeles Artesia Live, Gridley and 183rd St., Artesia

Oceanwide Plaza, 11th and Figueroa, Los

Angeles

Flower Market Redevelopment

• Developed by Southern California Flower Market

• In addition to 64K SF of wholesale and storage space,

will also include ground floor retail at bottom of

residential tower

• Expected groundbreaking date unknown

Flower Market Redevelopment, 754 Wall

Street, Los Angeles


Retail Key Findings










TOTAL: 14.8 M SF

Downtown LA contains nearly 15 M SF of retail space. However, many of the retail

spaces in the Fashion District are for wholesalers and may not be open to the public.

Overall, nearly 50% of Downtown’s retail is located within the Fashion District.

INVENTORY BY TYPESUBMARKET 1: DOWNTOWN LOS ANGELES


UNION

STATION

ARTS

DISTRICT

SOUTH

LITTLE TOKYO

4th Street

7th Street

Corridor,

not incl. DTLA

TOTAL: 40.9 M SF

11%

44%

8%

15%10%

11%

Submarket

5%

79%3%

5%

4%

3%

1%

KEY: RETAIL TYPOLOGY

Neighborhood

Center

Community

Center


MallOutlet/

Theme

Strip General

Retail

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



FASHION

DISTRICT

Source: CoStar

SOUTH PARK/

FASHION

DISTRICT


More than 40% of the retail inventory in DTLA is in pre-1950 buildings, which is

double that of the rest of the Corridor. DTLA has also seen more development in the last

twenty years, both in small storefronts in the Fashion District and centers in the CBD.



UNION

STATION

4th Street

7th Street

41%

15%

21%

23%

19%

42%

27%

12%

CORRIDOR,

not incl. DTLA

INVENTORY BY AGE

KEY: RETAIL AGE

1950-1975 1976-2000Pre 1950


SUBMARKET

ARTS

DISTRICT

SOUTH

LITTLE TOKYO

SOUTH PARK/

FASHION

DISTRICT


The deliveries of the LA Fashion Center in 2007 and the retail at LA Live in 2008

contributed to the delivery of nearly 2 M SF between 2007-2011. There has been less

new retail development in the Corridor since the recession, however.


(600,000)

(400,000)

(200,000)

-

200,000

400,000

600,000

800,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF

Deliveries and Absorption2007-2016

SF Delivered Net Absorpotion


Shopping center retail in the Downtown LA submarket has significantly outperformed the

retail in the Corridor as a whole, and has neared its pre-recession high.


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF

Shopping Center Rent and Vacancy2007-2016

Submarket 1 Corridor (w/o DTLA) LA County Submarket 1 Corridor (w/o DTLA) LA County


Non-shopping center retail in the Downtown LA submarket has seen moderate growth

since the recession and rents near $35 PSF annually, mirroring LA County. However,

vacancies are higher than LA County.


0%

2%

4%

6%

8%

10%

12%

14%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF

Non-Shopping Center Rent and Vacancy2007-2016




UNION

STATION

ARTS

DISTRICT

SOUTH

4th Street

FASHION

DISTRICT

SOUTH PARK/

FASHION

DISTRICT

Retail corridors include the large shopping and food centers in the Financial District,

ethnic shopping center and standalone retail in Little Tokyo, storefront retail along the

streets of the Fashion District and newer retail in converted industrial spaces.

SUBMARKET 1 | Retail Corridors


7th Street

B. Cultural Retail Shopping Center, E 2nd

Street, Little Tokyo, Los Angeles

C. Storefront Retail, S Los Angeles St.,

Fashion District, Los Angeles

D. Converted Industrial Uses, Mateo St and

7th Street, Arts Districts, Bellflower

A. Office and Shopping Complex, 7th Street

and Fig St., Financial District, Los Angeles

ILLUSTRATIVE CORRIDOR RETAIL

A

DC

B

LITTLE TOKYO



UNION

STATION

ARTS

DISTRICT

SOUTH

4th Street

FASHION

DISTRICT

SOUTH PARK/

FASHION

DISTRICT

The largest shopping centers include LA Fashion Mart, the Bloc, L.A. Live and Fig at

7th. All of these centers have been constructed or renovated in the last ten years.

SUBMARKET 1 | Shopping Centers

4th Street

7th Street

B. The Bloc, 400,000 SF, Financial District,

Los Angeles

C. L.A. Live, 360,000 SF, South Park, Los

Angeles

D. Fig at 7th, 330,000 SF, Financial District,

Los Angeles

A. LA Face Mart (wholesale), 650,000 SF,

Fashion District, Los Angeles

D

C

B

A

LARGE SHOPPING CENTERS

LITTLE TOKYO


Submarket 1 presents a variety of retail typologies, including renovated shopping

centers in the Financial District, standalone discount retailers and wholesalers in the

Fashion District, and newly converted industrial spaces.


Shopping centers in the Financial District, serving the

residents and 400,000 workers of the CBD, represent some of

the most prized retail location in the Corridor. Rents are

withheld (nearby, The Bloc is asking $60 PSF NNN), and Fig

at 7th is 99% leased. Fig at 7th was most recently renovated

in 2012 and offers monthly programming.

Cultural retail shopping centers like Japanese Village and

Little Tokyo Shopping Center in Little Tokyo are a regional

destination for East Asian retail shoppers (rents withheld, Little

Tokyo - 20% vacancy). Both were renovated in the last ten

years – in 2009 and 2014, respectively.

Former industrial space is being converted into retail in the

Arts District. New retail is attracting tenants that appeal to a

“foodie” millennial crowd such as Van Leuwen Ice Cream or

Stumptown Coffee Roasters (Asking rents as high as $60 PSF

NNN rents).

Storefront retail and wholesalers make up the bulk of the

retail in the Fashion District. Some storefronts are open to the

public, while others are more akin to small distribution

centers. Rents are lower than the more prized shopping center

locations but are still higher than the rents for non-shopping

center retail across the Corridor (between $27-40 PSF NNN).


Fig at 7th, Office and Shopping Complex,

7th Street and Fig St., Financial District

Cultural Retail Shopping Center, E 2nd

Street, Little Tokyo, Los Angeles

Storefront Retail, S Los Angeles St., Fashion

District, Los Angeles

Converted Industrial Uses, 580 S Alameda

St., Arts Districts, Los Angeles


DTLA is a Southern California restaurant and shopping destination. DTLA’s unique retail

offerings attract shoppers from across Southern California and serve 294,000

workers.

SUBMARKET 1 | Retail Gap Analysis


DEMAND* CURRENT SALES

Retail TypeResident and

Employee PotentialCurrent Sales






Grocery Stores $313 M $212 M




Clothing & Clothing Accessories $159 M $1,679 M



General Merchandise Stores $325 M $242 M




Restaurants/Other Eating Places $379 M $438 M

TOTAL $1,760 M $3,426 M

Note: Given that DTLA is a major regional employment center, HR&A adjusted its methodology to

include employee spending potential.

• Nearly half of retail sales

in DTLA are in clothing

stores, largely due to the

Fashion District.

• Retail gap analysis shows the

potential for up to ~150K SF

of new grocery store space

and ~330K of new general

merchandise stores to satisfy

unmet demand.

• Given the expected influx of

new residents and businesses,

new retail development,

especially in food &

beverage, is expected.

FINDINGS


Downtown LA has a strong retail market that is well positioned to continue growing with

the advent of the new light rail Corridor and a growing Downtown population.

• Although there have been few deliveries in the last five years, the

performance of recently developed shopping centers like Fig at 7th

indicate a strong market outlook for high quality retail space as

Downtown LA is revitalized. Smaller projects like City Market South in

the Fashion District, which features higher end retail and restaurants,

have also been supported by the market.

• The retail cluster around the Japanese Village Plaza acts as a cultural

anchor for Little Tokyo, though there is little existing retail around the

proposed station area at 7th/Alameda.

• The Arts District South station area is under retailed compared with

South Park/Fashion District and Little Tokyo station areas. As the

residential population in the Arts District, South Park, and Fashion

District continues to grow, more retail is expected to support it. Projects

including ROW DTLA will provide substantial new retail inventory in the

Arts District South station area.

• The WSAB Corridor also presents an important opportunity to

strengthen the Little Tokyo cultural retail hub, as well as to expand

neighborhood and convenience retail as mixed-use development

accelerates in the area.


ROW DTLA, Arts District, will include

200K SF of commercial space and will

carry fashion designers, eclectic food.

232 E 2nd STREET, Little Tokyo, is an

example of a newly developed mixed

use building with ground floor retail.

MODEL PROPERTIES


Retail Key Findings










Submarket 2 contains 2.5M SF of retail space across the Corridor, 66% of which is

standalone retail.

RETAIL TYPOLOGY

Neighborhood

Center

Community

Center


MallOutlet/

Theme

Strip General

Retail

9%

66%

8%

6% 11%

INVENTORY BY TYPE

TOTAL: 2.5 M SF


5

Corridor,

not incl. DTLA

TOTAL: 40.9 M SF

Submarket

11%

44%

8%

15%10%

11%

WASHINGTON

60

5

710

10

VERNON

SLAUSON

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



Source: CoStar



45%

23%

23%

6%

INVENTORY BY TYPE

The age of the retail in the submarket is comparatively older than the rest of the

submarket, and nearly 45% of the retail space is contained in pre-1950 buildings.


KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


SUBMARKET CORRIDOR

not incl. DTLA

Source: CoStar

5

WASHINGTON

60

5

710

10

VERNON

SLAUSON

19%

42%

27%

12%

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF





There has been little retail development in the submarket. The loss of tenants at the

Angelus Grand Plaza during the recession in 2008 constituted a large portion of the

negative absorption in the submarket.


(160,000)

(140,000)

(120,000)

(100,000)

(80,000)

(60,000)

(40,000)

(20,000)

-

20,000

40,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF




Rents for shopping center retail have not recovered from the recession.* High

shopping center vacancy can be attributed to long term vacancy at Angelus Grand

Plaza and limited inventory.


0%

5%

10%

15%

20%

25%

30%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF



*The limited number of new leases at shopping centers in this market

may create significant fluctuations in calculated average rent.


Rents for non shopping center retail are weak, but exceed average rents for the

Corridor not including DTLA. Vacancy is historically much lower than LA County,

however, indicating that there is consistent demand for this affordable product.


0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




5

WASHINGTON

60

5

710

10

VERNON

SLAUSON

Source: CoStar


Retail corridors in Submarket 2 include standalone retailers and strip retailers along S

Alameda St. and S Central Ave., standalone and strip centers on E Washington Blvd.

and E Olympic Blvd., and scattered retail and auto repair shops in the industrial area.


5

TOTAL: 40.9 M SF

A. Strip Center, S Alameda St., Los Angeles

C. Strip and Standalone Retail, E

Washington Blvd., Commerce

D. Auto Sales and Standalone Retail along

E Olympic Blvd., Los Angeles

B. Auto Repair Shop, near S Alameda St.,

Los Angeles


A

B

C

D


5

WASHINGTON

60

5

710

10

VERNON

Source: CoStar


Retail corridors in Submarket 2 include standalone retailers and strip retailers along S

Alameda St. and S Central Ave., standalone and strip centers on E Washington Blvd.

and E Olympic Blvd., and scattered retail and auto repair shops in the industrial area.


TOTAL: 40.9 M SF

SLAUSON

A. Angelus Grand Plaza, 200,000 SF, E

Olympic Blvd., Los Angeles

C. Commerce Corner, 2250 E Washington

Blvd., Commerce

B. El Faro Plaza, 125,000 SF, S Alameda

St., Los Angeles


B

C


A variety of retail typologies exist in the area, including underperforming shopping

centers in Commerce, standalone retail along S Central Ave. and S Alameda St., and

other retailers such as auto repair shops, that can be located within an industrial zone.


This aging shopping center, built in 1929, has struggled to

attract tenants since the Great Recession (2007-2012). The

shopping center is nearly half vacant and is anchored by

discount grocer (Food4Less) and local restaurants.

Auto repair shops can be found in Vernon’s industrial core.

Some of these shops are located on smaller lots and have

moderate parking, and serve many of the local

transportation businesses.

The El Faro Plaza contains 200 small retailers that offer

general merchandise and food. The center is attractive to

businesses as it is close to the wholesale district in DTLA. On

the weekends, many families from across East LA and South

Central congregate. Rents are high – over $30 PSF NNN,

and vacancy is near 2%.


Strip centers can be found along the north south arterials

such as S Central Ave. and S Alameda St. Some of these

centers show sign of disinvestment, and rents are moderate,

ranging from $16 to $22 PSF NNN annually.

Angelus Grand Plaza, E Olympic Blvd., Los

AngelesStrip Center, S Alameda St., Los Angeles

Auto Repair Shop, near S Alameda St., Los

Angeles

El Faro Plaza, 4433 S Alameda St., Los

Angeles


Current sales exceed resident spending potential, indicating that this retail market

draws in consumers from outside the submarket, such as local workers and weekend

shoppers.











Grocery Stores $51 M $286 M*




Clothing & Clothing Accessories $26 M $411 M








TOTAL $271 M $1,637 M

*May include food distribution sales

• Submarket 2 retail sales

show higher than expected

sales in home furnishing

stores, as well as grocery

and specialty food stores

(likely due to the inclusion of

wholesalers).

• Much of the existing

consumer-facing retail space

is underperforming. Given

the submarket’s industrial

character and lack of

residential density, there is

limited potential for

neighborhood retail.

FINDINGS


The retail market in the Submarket is limited, and rents are fairly weak, though

consistent with the Corridor.

• The retail market in the area has seen almost no new deliveries in

the last ten years and there are signs of disinvestment among the

retail properties. Shopping centers along Eastern Ave. and Washington

Blvd. in Los Angeles and Commerce show weak rents and moderate

vacancy.

• Station areas along the Blue line alignment (Washington, Vernon,

and Slauson) are in proximity to existing convenience retail and

smaller strip centers, though the currently weak retail market indicates

potentially limited new retail demand with WSAB.

• The Vernon Station is anchored by the El Faro Plaza, a small

shopping center that attracts a regional crowd due to its many smaller

local stores that appeal to a primarily Hispanic clientele. Crowds also

often stop at the Alameda Swap Meet next door. Linking this center

with the heavily Hispanic neighborhoods to its Southeast may

strengthen this existing hub.

• In the alternate alignment, the Pacific/ Vernon Station presents limited

retail opportunities, given its presence in a heavily industrial area.


EL FARO PLAZA, Los Angeles, is a

successful shopping center with many

small, local businesses.

MODEL PROPERTIES


Retail Key Findings










Submarket 3 contains 12.0M SF of retail space, 68% of which in standalone retail and

strip centers. Submarket 3 is mostly home to large amounts of aging standalone, strip,

neighborhood center and community center retail.

RETAIL TYPOLOGY

Neighborhood

Center

Community

Center


MallOutlet/

Theme

Strip General

Retail

9%

55%

11%

12%13%

INVENTORY BY TYPE

TOTAL: 12.0 M SF


5

105

PACIFIC/

RANDOLPH

FLORENCE/

SALT LAKE

FIRESTONE

Corridor,

not incl. DTLA

TOTAL: 40.9 M SF

Submarket

11%

44%

8%

15%10%

11%

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



SUBMARKET 3: HUNTINGTON PARK, SOUTH GATE, BELL GARDENS,

LYNWOOD, FLORENCE GRAHAM, WALNUT PARK

710

Source: CoStar


33%

24%

28%

15%

While Submarket 3 has more retail buildings constructed before 1950 than the rest of

the Corridor, not including DTLA, it also has a higher relative share of new buildings.


INVENTORY BY TYPE

KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


SUBMARKET

19%

42%

27%

12%

CORRIDOR

not incl. DTLA

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



5

105

PACIFIC/

RANDOLPH

FLORENCE/

SALT LAKE

FIRESTONE

710



Source: CoStar


There has been moderate new retail development in the submarket, most notably the

Azalea Regional Shopping Center, which delivered 380,000 SF of retail in 2014.


(200,000)

(100,000)

-

100,000

200,000

300,000

400,000

500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF




Rents for shopping center retail have not recovered from the recession. While rents

have been on the decline, vacancies have improved and are almost at pre-2007 levels.


0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$5

$10

$15

$20

$25

$30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




Rents for non shopping center retail are weak and have not recovered since the

recession. 2016 rents average $17.40 PSF NNN (representing an annualized decline

of 2.49% since 2007, even as overall inventory has declined from 6.7M SF to 6.2MSF).


0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




5

105

PACIFIC/

RANDOLPH

FLORENCE/

SALT LAKE

FIRESTONE



710

Source: CoStar

Retail is dispersed along major East-West and North-South arterial corridors such as

Pacific Blvd./ Long Beach Blvd., Gage Ave. and Florence Ave. Shopping centers cluster

at intersections of these arterial corridors.


A. Discount Retailers, Pacific Boulevard,

Huntington Park

C. Standalone Chain Restaurant, Firestone

Blvd., South Gate

D. Standalone Retail along Long Beach

Blvd., Lynwood

BA

C

D

B. Neighborhood and Strip Centers, Gage

Ave., Huntington Park



5

105

PACIFIC/

RANDOLPH

FLORENCE/

SALT LAKE

FIRESTONE



710

Source: CoStar

Larger shopping centers include power centers on Pacific Blvd./ Long Beach Blvd. and

Atlantic Blvd. In 2014, the Azalea Regional Shopping Center delivered 380,000 SF of

new retail, including a Walmart.

SUBMARKET 3 | Large Shopping Centers

C

A

B

D

B. Les Jardines, 170,000 SF, Bell Gardens

C. Azalea Regional Shopping Ctr., 380,000

SF, South Gate

D. Plaza Mexico, 660,000 SF, Lynwood

A. Curacao Center, 180,000 SF, Huntington

Park



Many of the retail properties in the submarket are aging and anchored by discount

stores. Nonetheless, new retail development aimed at the middle class points to positive

signs in the market.


Discount food and retail stores, such as the Food4Less at

Les Jardines near the Bicycle Casino are common in the

shopping centers. For example, rents at Les Jardines and

adjacent centers are moderate and range from $14 to $24,

PSF NNN.

New shopping centers aimed at the middle class are

emerging. For example, the Azalea Regional Shopping

Center is a new 380,000 SF open-air shopping center

targeted at the area’s vast Hispanic middle-class (per the

building’s developer, Primestor). The development is

anchored by Michaels and Walmart. Rents are withheld, but

the center is 100% leased.

Standalone and strip retail dominate the main arterials.

Many of these storefronts show signs of disinvestment, and

rents are low (property in photo is $12 Annual NNN). Many

of these storefronts are local restaurants and stores beloved

by the nearby community, and are geared at a primarily

low and middle income Spanish-speaking population.

Les Jardines, Eastern Ave. & Florence Ave.,

near Bicycle Casino, Bell Gardens

Azalea Regional Shopping Ctr., Firestone

Blvd. and Atlantic Ave., South Gate

Standalone Retail, Long Beach Blvd.,

Lynwood

Curacao Center, Slauson Ave. & Pacific Blvd.,

Huntington Park


Neighborhood center retail such as the Curacao Center at

Pacific Blvd. and Slauson Ave. represents a key component

of the retail in this submarket. Many of these older centers

show sign of disinvestment, and rents are moderate, ranging

from $15 to $25 PSF NNN.


An analysis of unmet spending potential indicates that there is retail leakage in the area

and potentially unmet demand for general merchandise and specialty stores.























TOTAL $1,578 M $2,485 M

• Submarket 3 has a fair

amount of sales relative to

resident spending potential,

but there is a lack of quality

retailers and much of the

existing retail may still be

underperforming.

• Even with the recent opening

of the Azalea, the retail gap

analysis suggests that there

may still be potential for

100K-120K of new general

merchandise and hobby

store retail.

FINDINGS


Average rents indicate a stable retail market. Though many properties show signs of

disinvestment, there has been an uptick in retail development, particularly aimed at the

area’s burgeoning Hispanic middle class.

• Retail targeting the submarket’s unique ethnic and racial makeup

presents a growth opportunity. The Azalea - a 380,000 SF open-air

mall targeted at the neighborhood’s Hispanic population- is currently

100% leased and generated positive press when it opened in 2014.

As the Hispanic middle class continues to grow, there could be

opportunities to renovate and bring new uses to existing ethnic

shopping centers, such as Plaza Mexico. A similar retail hub, the

Leimert Park Village, which serves particularly African-Americans, has

a number of properties that are being repositioned in advance of the

Crenshaw/LAX LRT line.

• WSAB could help stabilize existing retail hubs near

Pacific/Randolph and Florence/Salt Lake Stations. The Pacific/

Randolph Station area serves “El Corido,” a historic but declining

Hispanic retail strip on Pacific Blvd. WSAB presents an opportunity for

renovation and stabilization.

• The station area around Firestone (across from Azalea) is well

equipped to be strengthened by the light rail, which would allow it to

maintain its momentum as a new shopping center in the submarket,

especially given South Gate’s plans for large scale TOD in the area.


LEIMERT PARK VILLAGE, a shopping

destination historically aimed at African

Americans, is being repositioned in

advance of the Crenshaw/LAX LRT line.

AZALEA, South Gate, is a new open-air

shopping center, that will be steps

away from the Firestone Station.

MODEL PROPERTIES


Retail Key Findings










Submarket 4 contains 10.5M SF of retail space, primarily in shopping centers along

Firestone Blvd. and Alondra Blvd. The future Paramount and Bellflower Stations, will be

located within their cities’ respective main retail corridors.


605

710

5

105

Rosecrans Ave.

Para

mount B

lvd.

PARAMOUNT/

ROSECRANS

I-105/ GREEN LINE

BELLFLOWER

GARDENDALE


RETAIL TYPOLOGY

Neighborhood

Center

Community

Center


MallOutlet/

Theme

Strip General

Retail

9%

38%12%

18%

9%14%

INVENTORY BY TYPE

TOTAL: 10.5 M SF

Submarket Corridor,

not incl. DTLA

TOTAL: 40.9 M SF

11%

44%

8%

15%10%

11%

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



Source: CoStar


Submarket 4 has a comparatively higher proportion of new retail, attributable

primarily to the addition of new shopping centers in Downey. Indeed, over 2.5 million SF

of retail has been added since 2000.


605

710

5

105

Rosecrans Ave.

Para

mound

Blv

d.

PARAMOUNT/

ROSECRANS

I-105/ GREEN LINE

BELLFLOWER

GARDENDALE


8%

43%26%

24%

INVENTORY BY TYPE

KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


19%

42%

27%

12%

CORRIDOR

not incl. DTLA

SUBMARKET

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



Source: CoStar


There has been strong new retail development in the submarket in recent years, most

notably the Downey Promenade in 2016, which includes over 450,000 SF of retail.


(100,000)

-

100,000

200,000

300,000

400,000

500,000

600,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF




Shopping center retail rents in Submarket 4 have surpassed the Corridor average from

2008 onward. Vacancies, however, have re-aligned with the Corridor average, after a

steady period of decline between 2001 and 2015.


0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$5

$10

$15

$20

$25

$30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




Non-shopping center retail rents in Submarket 4 have not recovered since the

recession, but vacancy has recently returned to pre-recession lows. Rents are weak,

averaging $17.20 PSF NNN (representing an annualized decline of 1.84% since 2007).


0%

2%

4%

6%

8%

10%

12%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF





Prominent retail corridors include strip and neighborhood centers along major arterials

such as Paramount Blvd., Alondra Blvd., and Firestone Blvd., regional shopping

centers in Downey, and traditional downtown retail in Bellflower.


B. Downtown Standalone Retail, Firestone

Blvd. and Downey Ave., Downey

C. Regional Shopping Centers, Firestone

Blvd. and Lakewood Blvd., Downey

D. Downtown Retail, Bellflower Blvd. and

Belmont St., Bellflower

A. Strip Retail and Neighborhood Centers,

Paramount Blvd. & Alondra Blvd., Paramount


605

710

5

105

Rosecrans Ave.PARAMOUNT/

ROSECRANS

I-105/ GREEN LINE

GARDENDALE

B

DBELLFLOWER

A

C

Alondra Blvd.

Source: CoStar



The largest shopping centers are in Downey, which includes Stonewood Center, Downey

Promenade and Downey Landing. Paramount contains smaller retail centers including

the Northgate Markets and the Paramount Towne Center (incl. a Walmart Supercenter).


B. Stonewood Center, 930,000 SF, Downey

C. Downey Promenade and Downey

Landing, 600,000 and 375,000 SF, Downey

A. Northgate Markets, 200,000 SF

Paramount


605

710

5

105

Rosecrans Ave.PARAMOUNT/

ROSECRANS

I-105/ GREEN LINE

GARDENDALE

B

D

BELLFLOWER

A

C

Alondra Blvd.

D. Paramount Towne Center, 220,000 SF,

Paramount

Source: CoStar


Submarket 4 presents a variety of retail typologies, including strip centers and

neighborhood centers along major arterials, shopping centers old and new such as

Stonewood and Downey Promenade, and reemerging downtown retail in Bellflower.


Strip and neighborhood center retail in Paramount, including

key corridors on Paramount Blvd. and Alondra Blvd.,

represents much of the retail in the city. Rents range between

$15 – 35 PSF depending on the quality of storefront, and

there is 5-20% vacancy in these centers.

Porto’s in Downey is a regional destination for consumers.

Retail brokers attribute the recent success of Downtown

Downey as a shopping destination in part to its presence,

which draws in consumers from far and near, who end up

patronizing other businesses.

Main-street retail in Bellflower anchors a reemerging retail

corridor along Bellflower Blvd., composed of strip centers and

standalone retail establishments ($15-30 PSF NNN rents,

5%). Improvements have helped attract patrons to the area

and encouraged development including the $7M mixed-use

Belmont Court (opened 2012).

New shopping center retail in Downey includes the Downey

Promenade and the Downey Landing. The Promenade

(above) is a new 700K SF shopping center, completed in

2016 (rents withheld, 1.3% vacancy), due north of the 30

acre Kaiser Permanente medical campus. Anchor tenants

include Walmart, Cinemark Theater, and Home Goods.

Strip Center, Paramount Blvd. & Rosecrans

Ave., Paramount

Porto’s, Firestone Blvd. and Downey Ave.,

Downey

Downey Promenade, Apollo Way and

Lakewood Blvd., DowneyBelmont Court, Bellflower Blvd. and Belmont

St., Bellflower



Submarket 4 has large retail surpluses in general merchandise stores and health retail,

indicating that its large shopping centers and robust medical centers attract shoppers

from beyond the immediate area.























TOTAL $1,655 M $2,102 M

• Residents of Submarket 4

have access to many retail

destinations, mainly at the

shopping centers in Downey.

• Sales surpass resident

spending potential, though

there may be potential for

new differentiated retail as

Downey’s status as a regional

shopping hub grows.

FINDINGS


Submarket 4 contains a growing, diverse retail market. Downey is currently a major

shopping destination within the Corridor. Shopping center rents and vacancy now surpass

the Corridor overall.

• Shopping center retail activity has been strong, especially in

Downey. The submarket has seen a substantial increase in overall

shopping-center space, primarily driven by new development at the

Downey Landing and Promenade, which opened in 2008 and 2016,

respectively. The opening of a Porto’s Bakery in Downtown Downey has

also bolstered Downey as a regional retail destination that can attract

shoppers and induce higher market rents. Paramount and Bellflower

are making investments to hopefully replicate Downey’s growth

• While Downey is the focus of much of the market growth, the

Gardendale Station area is located in a more industrial part of

Downey and lacks proximity to the major retail corridors.

• WSAB could help establish new retail hubs at the Paramount/

Rosecrans Station and strengthen existing retail at the Bellflower

Station. The underutilized warehousing and parking lots near the

Paramount/Rosecrans Station area present an opportunity for a large

shopping center, depending on demand. Further, the light rail could

potentially strengthen the walkable retail main street at Bellflower

Station.

SUBMARKET 4 | Key Findings, Submarket 4

DOWNEY PROMENADE, Downey, is a

new, walkable, outdoor shopping

center and includes public plazas.

OLD TOWN PASADENA, Pasadena, is a

popular retail and dining corridor,

known for its walkability and charm.

MODEL PROPERTIES


Retail Key Findings










Submarket 5 contains 16.1M SF of retail space, or 40% of the retail in the Corridor not

including DTLA. The station areas are in close proximity to regional shopping hubs,

including the retail cluster around the Los Cerritos Mall, and Little India in Artesia.

15%

34%

3%

17%

23%8%

INVENTORY BY TYPE



PIONEER

GRIDLEY/

183RD


Del Amo Blvd.

605

91

710

Alondra Blvd.

South St.

Rosecrans Ave.

Pio

neer B

lvd.

Lakew

ood B

lvd.

TOTAL: 16.1 M SF

RETAIL TYPOLOGY

Neighborhood

Center

Community

Center


MallOutlet/

Theme

Strip General

Retail

Corridor,

not incl. DTLA

TOTAL: 40.9 M SF

Submarket

11%

44%

8%

15%10%

11%

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



Source: CoStar


8%

63%

28%

1%

The majority of the retail space was built between 1950-1975, including the Los Cerritos

Mall. There has been little new development since 2000.



PIONEER

GRIDLEY/

183RD


Del Amo Blvd.

605

91

710

Alondra Blvd.

South St.

Rosecrans Ave.

Pio

neer B

lvd.

Lakew

ood B

lvd.

INVENTORY BY TYPE

KEY: OFFICE AGE

1950-1975 1976-2000Pre 1950


19%

42%

27%

12%

SUBMARKET

Less than 5,000 SF

70,000 to 170,000 SF

170,000 to 300,000 SF

300,000 to 600,000 SF

5,000 SF to 70,000 SF



Source: CoStar


Submarket 5 suffered during the recession, and has seen minimal new retail

development in the last ten years. Most new space has been driven by expansions at the

Los Cerritos Mall.


(400,000)

(300,000)

(200,000)

(100,000)

-

100,000

200,000

300,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SF




Rents for shopping center retail have not yet fully recovered from the recession

though rents have made gains over the last five years and vacancy is low.


0%

1%

2%

3%

4%

5%

6%

7%

8%

$0

$5

$10

$15

$20

$25

$30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




Rents for non-shopping center retail also have not fully recovered from the

recession. However, rents for non-shopping center now slightly surpass the rents in the

Corridor, though vacancy remains high.


0%

2%

4%

6%

8%

10%

12%

$0

$5

$10

$15

$20

$25

$30

$35

$40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge R

ent N

NN

, A

nnual PSF




Prominent retail corridors include the cluster of shopping centers around the Los Cerritos

Mall and Lakewood Center, as well as Little India, a key regional cultural retail district.

Over 40% of the corridor’s shopping center retail space is located in Submarket 5.


B. Lakewood Mall and adjacent retail

centers, Lakewood Blvd., Lakewood

C. Artesia’s Little India, Pioneer Blvd.,

Artesia

D. Standalone and older shopping center

retail, Pioneer Blvd., Norwalk

A. Los Cerritos Mall and adjacent retail

centers, Cerritos

ILLUSTRATIVE CORRIDOR RETAILSUBMARKET 5: CERRITOS, ARTESIA, LAKEWOOD, NORWALK

PIONEER

GRIDLEY/

183RD

Del Amo Blvd.

605

91

710

Alondra Blvd.

South St.

Rosecrans Ave.

Pio

neer B

lvd.

Lakew

ood B

lvd.

A

C

B

D

Source: CoStar


Large shopping centers include super regional centers such as Los Cerritos Mall and

Lakewood Mall and adjacent shopping centers as well as smaller centers located on

major arterials such as the Norwalk Town Center and Cerritos Towne Center.


B. Lakewood Mall, 2,040,000 SF, Lakewood

C. Cerritos Towne Center, 420,000 SF,

Cerritos

D. Norwalk Town Center, 380,000 SF,

Norwalk

A. Los Cerritos Mall,1,370,00 SF, Cerritos

LARGE SHOPPING CENTERSSUBMARKET 5: CERRITOS, ARTESIA, LAKEWOOD, NORWALK

PIONEER

GRIDLEY/

183RD

Del Amo Blvd.

605

91

710

Alondra Blvd.

Rosecrans Ave.

Pio

neer B

lvd.

Lakew

ood B

lvd.

A

C

B

D

Source: CoStar


Retail typologies include super regional malls such as the Lakewood and Los Cerritos

malls, shopping centers immediately proximate to the regional centers such as the

Cerritos Promenade, standalone “main street” retail and other smaller shopping centers.


Recently renovated malls such as the Los Cerritos Mall are

currently performing well. The mall (rendered above) is an

1.3 M SF shopping center, completed in 1971. Anchor tenants

include Nordstrom, Sears, and Macy’s (rents withheld, 1.5%

vacancy). The mall underwent a $45M renovation in 2015,

that included a full internal makeover, as well space for new

tenants including Dicks and Harkins Theatre.

Shopping centers adjacent to the super regional malls,

Lakewood Mall and Los Cerritos Mall, are performing

steadily. For instance, the Los Cerritos Promenade is a

280,000 SF shopping center, completed in 2002 (rents

withheld, 3.0% vacancy). Anchor tenants include Target and

smaller restaurants such as Starbucks and Panda Express.

Strip centers and standalone retail in Artesia’s Little India

make up a cultural retail destination situated along Pioneer

Blvd., mainly between 183rd St and 195th St. These shops and

restaurants ($20-36 PSF NNN rents, 0-20% vacancy)

specialize in cuisine and products from the Indian subcontinent

and attract South Asians from around the LA region.


Cerritos Promenade, Lakewood Blvd.,

Lakewood

Standalone and Strip Centers in Artesia’s

Little India, Pioneer Blvd., Artesia

Los Cerritos Mall and adjacent shopping

centers, Cerritos

H-Mart, Alondra Square, Pioneer Blvd.,

Norwalk

Some shopping centers that are not immediately by the

super regional centers, such as Alondra Square, are

struggling to attract tenants (rents withheld, 65% vacancy). H-

Mart (above) is a large Korean grocer that specializes in East

Asian cuisine and products to attract the local East Asian

population.


Driven by the presence of regional shopping destinations, Submarket 5’s current sales

far outstrip projected resident spending potential, demonstrating the area’s ability to

draw in shoppers from beyond the submarket.























TOTAL $2,250 M $3,666 M

• Submarket 5 has high retail

sales due to the role the

Cerritos Mall (and associated

shopping centers) and

Downtown Artesia play as

regional shopping

destinations.

• Smaller-scale retail

development can still be

supported near the station

area, depending on future

patterns of residential

density.

FINDINGS


Submarket 5 is a super regional shopping destination. The WSAB alignment could

help strengthen nodes of high-performing shopping center retail in Cerritos as well as

the South Asian cultural retail hub in Artesia.

• Submarket 5 contains a large share of shopping center retail. Per-

capita retail spending is over $19,000, nearly twice as much as cities

in the other submarkets and about 25% greater than the per-capita

spending in LA County.

• The submarket has seen a steady increase in overall shopping-center

inventory over the last ten years (from 10.4M SF to 10.8M SF),

primarily driven by expansions at the Los Cerritos Mall, including a

full interior renovation in 2015. Non-shopping center inventory has

decreased by 200,000 SF in the same period.

• The retail cluster around Pioneer Blvd. in Artesia acts as a cultural

anchor for the greater region’s South Asian community, and there is

substantial walkable retail near the proposed Pioneer Station area.

• The WSAB terminus could strengthen the Little India cultural retail

hub, and attract additional foot traffic and density to the hub

(similar to the Sawtelle Blvd. Asian food hub). The Los Cerritos Mall

could also benefit from the light rail if it ensures that the station is

well integrated into the retail complex.


THE BLOC, Downtown LA, includes a

pedestrian tunnel to link Metro to the

retail complex.

SAWTELLE BLVD, Japantown, is a well-

trafficked restaurant and retail corridor

known for its variety of Asian cuisine.

MODEL PROPERTIES


INDUSTRIAL


Industrial Key Findings

Industrial Submarket Comparative Analysis

Industrial Submarket Characterization





Submarket 4: Paramount, Downey, Bellflower, Cerritos, Artesia, Norwalk, Lakewood


Industrial | Market Overview

• The greatest amount of industrial space is located in Submarket 2 (Commerce and Vernon), followed by and

Submarket 1 (DTLA). The two largest industrial sub-types found along the Corridor are Warehouse/Distribution

and Manufacturing.

• With the Fashion, Flower, Toy, and burgeoning Arts Districts, DTLA industrial space serves a variety of

specialized uses. DTLA has substantially higher rents than the rest of the WSAB submarket and slightly higher

vacancies at 3%.

• Submarket 2 alone includes 11% of LA County’s industrial space. It is a major traditional industrial market.

Rents are 20% higher than the County average.

• Outside of Submarket 1 & 2, industrial is sprinkled throughout the submarkets, primarily in industrial parks.

There are extremely low vacancies throughout the Corridor. Excluding DTLA, the Corridor has an average

vacancy of 2%, lower than the LA County average.

• While Vernon and the balance of Submarket 2 are likely to remain an industrial haven, other submarkets along

the WSAB are looking to reposition industrial for other uses.

• Please note that this industrial inventory counts in this section include “flex” buildings, which are defined as

multi-use buildings that may be used as office, research and development, quasi-retail sales space, and

including but not limited to industrial, warehouse, and distribution uses. Flex buildings have also been called

Incubator, Tech and Showroom buildings in markets throughout the country.


INVENTORY BY TYPE

There is approximately 206 M SF of industrial and flex space* across the Corridor,

primarily in warehouse and distribution sub-type spaces. The Corridor is divided into 4

industrial submarkets for purposes of this study.

SUBMARKET COMPARATIVE ANALYSIS | INVENTORY

710

110

91

105

1

2

605

INDUSTRIAL TYPE

Less than 10,000 SF

500,000 to 900,000 SF

900,000 to 1,400,000 SF

Greater than 1,400,000 SF

10,000 SF to 500,000 SF

Manufacturing

Showroom

Food Processing/

StorageWarehouse/

Distribution

RENTABLE AREA

TOTAL: 206 M SF

4

65%

24%

6% 4% 1%

Other/

Uncategorized



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynnwood


Paramount, Bellflower,

Cerritos, Artesia,

Lakewood, Norwalk

3

4

5

10

Source: CoStar


The greatest density of industrial and flex space exists in Submarkets 1 and 2, while

there are other significant clusters both along the WSAB right-of-way and in peripheral

areas of Submarkets 3 and 4.

SUBMARKET COMPARATIVE ANALYSIS | INVENTORY

710

110

91

105

1

2

605



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynnwood



Cerritos, Artesia,

Lakewood, Norwalk

3

4

5

10

B. Distribution Center

A. Printing and Distribution Facility

C. Manufacturing/Processing Facility

B. EJM Co., Metal Supply and Processing

D. Food Storage and Distribution Center

AB

C

D

ILLUSTRATIVE INDSUTRIAL PROPERTIES

Source: CoStar


HR&A’s industrial market analysis focused on four particular sub-types. Other sub-types,

such as telecommunications and R&D space, were not in significant supply within the

Corridor, and were categorized as “other.”

SUBMARKET COMPARATIVE ANALYSIS | Inventory Type

WAREHOUSE/DISTRIBUTION MANUFACTURING

FOOD PROCESSING/STORAGE SHOWROOM

• Facilities used for storage and distribution of goods.

• Average size: 98,000 SF• Facilities primarily used for manufacturing products, but

may include some warehousing or distribution areas.

• Average size: 40,000 SF

• Used for the processing of and packaging of food

products. Normally have cold storage/freezer space.


• Specifically designed for display of goods, such as

furniture, vehicles, and apparel.



Submarket 2 contains over 104.3 SF of industrial space, which is by far the greatest

share in any submarket and is more total space than the other three submarkets

combined.

Source: CoStar

SUBMARKET COMPARATIVE ANALYSIS | Distribution

Distribution of Industrial Inventory Sub-Type by Submarket

(2016, SF)

19 M

68 M

16 M

32 M

6 M

26 M

11 M

7 M

2 M

8 M

624 K 966 K

2 M 2 M

1 M

2 M

2 M

518 K

89 K

267 K

Submarket 1

Submarket 2

Submarket 3

Submarket 4

Warehouse/Distribution Manufacturing Food Processing/Storage Other/Uncategorized Showroom

30.7 M

104.3 M

28.3 M

43.3 M

TOTAL INVENTORY

(SF)


Source: CoStar


Average Rent

(2016, NNN, Annual)

Vacancy

(2016)

Industrial Inventory

(2016, SF)


30.7 M $24.21 3.50%

SUBMARKET 2Vernon, Commerce 104.3 M $7.62 2.00%

SUBMARKET 3Maywood, Huntington Park, South Gate, Bell,

Bell Gardens, Lynnwood, Florence Graham,

Walnut Park

28.3 M $11.01 1.00%

SUBMARKET 4Downey, Paramount, Bellflower, Cerritos,

Artesia, Lakewood, Norwalk43.3 M $8.64 1.20%

CORRIDOR 208.1 M $12.00 2.00%

LA COUNTY 921.79 M $10.38 2.10%

INLAND EMPIRESan Bernardino and Riverside Counties

579.01 M $6.12 4.40%

Industrial space within the Corridor accounts for over 20% of LA County’s overall

inventory. Vacancy was low across the Corridor in 2016. Rents in Submarket 1 are

significantly higher than in other submarkets, although vacancy is also slightly higher.


Submarket 2 contains the highest share of Warehouse/Distribution, Manufacturing, and

Food Processing/Storage facilities, whereas Submarket 1 has the highest share of

showrooms.

Source: CoStar


Distribution of Sub-Types Across Submarkets

(2016, % of overall SF of each sub-type)

14%

51%

12%

24%

12%

52%

21%

15%

21%

66%

5%8%

21%

30%

17%

33%

66%

20%

3%

10%

0%

10%

20%

30%

40%

50%

60%

70%

Submarket 1 Submarket 2 Submarket 3 Submarket 4

Warehouse/Distribution Manufacturing Food Processing/Storage Other/Uncategorized Showroom


Proposed industrial buildings are concentrated in the northern portion of Submarket 2,

and consist primarily of warehouse and distribution facilities.

SUBMARKET COMPARATIVE ANALYSIS | PLANNED AND PROPOSED

710

110

91

105

2

605

4



SUBMARKET 3:

Huntington Park,

South Gate, Bell,

Bell Gardens,

Lynnwood



Cerritos, Artesia,

Lakewood, Norwalk

3

4

5

10

B. Pacific Bandini Center - 265,000 SF

A. 7361 E Gage Ave – SF unknown

C. E2640 E Washington Blvd - 103,000 SF

D. 6000 Bandini Blvd - 116,000 SF

A

BC

D

Source: CoStar

1


E Vernon Ave.

61%20%

8%

5%6%

Submarket 1 (Downtown Los Angeles) has 31 M SF of industrial space. 61% of this

space is Warehouse/Distribution space and another 20% is used for Manufacturing.

INVENTORY BY TYPE

SUBMARKET 1| Inventory

INVENTORY BY TYPE

INDUSTRIAL TYPE

Less than 10,000 SF

500,000 to 900,000 SF

900,000 to 1,400,000 SF


10,000 SF to 500,000 SF

Manufacturing

Showroom

Food Processing/

StorageWarehouse/

Distribution

RENTABLE AREA

TOTAL: 31 M SF

Other/

Uncategorized

110

10

5

Martin Luther King Jr. Blvd.

SOUTH PARK/

FASHION

DISTRICT

Source: CoStar

UNION

STATION

ARTS

DISTRICT

SOUTH

LITTLE

TOKYO



110

10

5

Martin Luther King Jr. Blvd.

SOUTH PARK/

FASHION

DISTRICT

Source: CoStar

UNION

STATION

ARTS

DISTRICT

SOUTH

LITTLE

TOKYO


Downtown Los Angeles includes the Fashion District, Toy District, Flower District, and

Arts District and much of the industrial is positioned to serve these unique markets. There

is also a mix of typical light industrial and manufacturing facilities.

SUBMARKET 1| Sample Properties

B. UNI Hosiery Company

• Industrial warehouse

• 685,000 SF

• Built 1988

A. L.A. Times Olympic Printing Plant

• Manufacturing facility

• 420,000 SF

• Built 1931


AB


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Ave

rage A

nnua

l Rent

PSF

($)

Submarket 1 Corridor Submarket 1 Corridor

After falling during the Great Recession (2007-2012), rents in Submarket 1 have

recovered beyond pre-Recession levels. Downtown LA has seen a renaissance, as a

whole, in recent years and industrial rents continue to surpass Corridor averages.

SUBMARKET 1 | Performance

Rent And Vacancy: Submarket 1 vs. Corridor

(2007-2016)

Source: CoStar


-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

(%

)

Deliveri

es/

Abso

rption (

SF)

Deliveries Absorption Vacancy

Both deliveries and absorption have fluctuated in the past ten years. With the jumps in

rent since 2010, shown in the last chart, vacancy rates have steadily increased, to 3.6%.


Industrial Deliveries, Absorption, and Vacancy: Submarket 1

(2007-2016)

Source: CoStar


Submarket 1 is the second largest industrial submarket within the Corridor and is

experiencing record-low vacancy.

• As average rents have more than doubled in the past six years, vacancy has also trended

upward in Submarket 1. This uptick in vacancy is likely driven by a combination of contractions

in apparel, textile, and other manufacturing industries as well as some resistance to rent

increases by tenants.

• Compared with the rest of the Corridor, Submarket 1 has gained the least amount of new

industrial space in the past decade, which is likely due to the scarcity and expense of

available land. The scarcity and expense of available land have also contributed to the

increasing volume of hybrid-industrial or mixed-use developments occurring in the area, which

bring in other, higher value land uses, like residential.

• With such high rents and little to no new product, it is likely that industrial space will

remain expensive in this submarket. An increasing number of industrial spaces are also being

used as “flex spaces” to accommodate other uses, which contribute to a rise in average rents.

• The introduction of light rail service may encourage the conversion of industrial space to

other non-industrial uses. While better transit access could certainly benefit industrial workers,

the general decline of manufacturing and uptick in logistics and distribution means that the

primary industrial user base requires fewer workers who would make use of the light rail line.

This, in combination with the value premium that often accrues to transit-adjacent residential

and/or office, suggests that the WSAB light rail may accelerate the development of non-

industrial uses in Submarket 1.


Source: HR&A, CoStar, CBRE


Submarket 2 contains the greatest share of industrial space along the Corridor, with the

vast majority being Warehouse/Distribution and Manufacturing Space.

INVENTORY BY TYPE


SUBMARKET 2: Huntington Park, South Gate, Bell, Bell Gardens, Lynnwood INVENTORY BY TYPE

INDUSTRIAL TYPE

Less than 10,000 SF

500,000 to 900,000 SF

900,000 to 1,400,000 SF


10,000 SF to 500,000 SF

Manufacturing

Showroom

Food Processing/

StorageWarehouse/

Distribution

RENTABLE AREA

TOTAL: 206 M SF

65%

24%

6% 4% 1%

Other/

Uncategorized

E Vernon Ave. 5

60

710

Florence Ave.

10

Source: CoStar

WASHINGTON

VERNON


SUBMARKET 2: Huntington Park, South Gate, Bell, Bell Gardens, Lynnwood

5

60

71010

WASHINGTON

VERNON

Some of the largest industrial spaces in the Corridor are located in Submarket 2,

including Dependable Supply Chain Services. There are also numerous light

manufacturing facilities, such as T&H Store Fixtures.

SUBMARKET 2 | Sample Properties

B. T&H Store Fixtures

• Distribution facility

• 1,680,000 SF

• Built 1971

AA. Dependable Supply Chain Services

• Manufacturing facility

• 171,000 SF

• Built 1958

B


Source: CoStar


Deliveries that came to market during the Great Recession (2007-2012) were still

absorbed quickly, keeping vacancy well below 4% through that period. After a brief

uptick in 2014 and 2015, vacancy is now at the lowest point it has been in 10 years.


-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

(%

)

Deliveri

es/

Abso

rption (

SF)



(2007-2016)

Source: CoStar


Rents in Submarket 2 did not decline drastically during the Recession and have

recovered beyond pre-Recession levels. Current Corridor rents far surpass the

Submarket 2 average, but this due to exceptionally high average rent in Submarket 1.



(2007-2016)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Avera

ge A

nnual R

ent PSF (

$)


Source: CoStar


Submarket 2 is the most heavily industrial submarket within the Corridor and is

experiencing record-low vacancy.

• As rents have stabilized and declined slightly in the past three years, vacancy in

Submarket 2 has dipped to the lowest it has been in the past decade. Leasing activity

has been driven by strong demand from third-party logistics firms, food packaging, e-

commerce, and general merchandise users.

• Submarket 2 has gained the greatest share of new industrial space across the three

submarkets evaluated, which reflects Submarket 2’s strong competitive position and

industrial-friendly policies. This submarket’s central location in Los Angeles County,

excellent freeway access, and business-friendly political environment is expected to help

maintain strong market fundamentals.

• Development of new, multi-story industrial buildings is an opportunity for Submarket

2. Available industrial land is increasingly scarce and expensive throughout Southern

California region (industrial land values have risen 30% to 40% throughout the region),

which may prompt industrial developers to consider building multi-story industrial facilities

in Submarket 2. Multi-story industrial is still relatively uncommon in the United States, but

recently developed multi-story industrial buildings in Seattle, for instance, have achieved

rents that are as much as 50% higher than standard industrial rates. Furthermore, the

average age of the industrial building stock in Submarket 2 is nearing 60 years,

indicating that many buildings are nearing the end of their useful lives.


Source: HR&A, CoStar, CBRE, Wall Street Journal




Submarket Characterization







Submarket 3 contains fewer industrial properties than surrounding submarkets but is

similarly dominated by Warehouse/Distribution and Manufacturing space.

INVENTORY BY TYPE


INVENTORY BY TYPE

INDUSTRIAL TYPE

Less than 10,000 SF

500,000 to 900,000 SF

900,000 to 1,400,000 SF


10,000 SF to 500,000 SF

Manufacturing

Showroom

Food Processing/

StorageWarehouse/

Distribution

RENTABLE AREA

TOTAL: 28 M SF

Other/

Uncategorized

56%37%

2% 5% <1%


PACIFIC/RANDOLPH

FLORENCE/SALT LAKE

FIRESTONE

Firestone Blvd.

5

105

Source: CoStar



PACIFIC/RANDOLPH

FLORENCE/SALT LAKE

FIRESTONE

Firestone Blvd.

5

105

Source: CoStar

Industrial properties in Submarket 3 are primarily clustered in peripheral areas of the

submarket as well along the WSAB right of way, particularly near the proposed

Firestone Station.


B. Lynwood Industrial Area

A. Cudahy/South Gate Industrial Area

C. South Gate Industrial Park

C

B


A


Industrial rents within Submarket 3 dropped substantially during the Great Recession

(2007-2012) and struggled to return to their post recession levels near $8 PSF until

2016.



(2007-2016)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

(%

)

Avera

ge A

nnual R

ent PSF (

$)

Axis Title


Source: CoStar


The Great Recession (2007-2012) also impacted Submarket 3 with negative absorption,

which has recently started to be re-absorbed. The first major deliveries in 10 years

began in 2016.

SUBMARKET 3| Performance


(2007-2016)

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

(%

)

Deliveri

es/

Abso

rption (

SF)


Source: CoStar


Although Submarket 3 contains the least amount of industrial space, its industrial

performance has been strong, with low vacancy rates and high rents relative to other

submarkets in the Corridor, not including DTLA.

• At just 1%, vacancy is currently extremely low and is likely a major factor behind the

submarket average annual rent of $11.00 PSF, which is second only to Submarket 1. There

have been also been very few deliveries of industrial space within Submarket 3 over the past

10 years, which has likely contributed to the area’s extremely low vacancy and high rents.

• Although rents are currently much higher in 2016 than what is found in other submarkets,

it should be noted that they were not nearly as high in 2015 which indicates that the market

average is being buoyed by the new properties delivered in 2016, which are all warehouse

spaces.

• Although market demand is currently highest for warehouse and distribution space,

attraction of light manufacturing and other non-traditional industrial uses (e.g., maker

spaces, clean technology, etc.) may also support City and community goals, particularly

given the high proportion of existing manufacturing spaces in this submarket, which may

be less suitable for warehouse and distribution uses. Warehousing and distribution spaces

also generally support low employment densities and bring significant amounts of truck traffic.

Attraction of of other types of industrial users could support higher employment densities and

higher quality jobs for local residents, while reducing the burden of truck traffic on City streets.

This would also translate to greater pedestrian activation of station areas, as there would be a

greater pool of potential transit users.



Warehouse/Distribution space dominates Submarket 4, with manufacturing making up a

smaller share of space than in Submarkets 2 and 3.

INVENTORY BY TYPE


INVENTORY BY TYPE

INDUSTRIAL TYPE

Less than 10,000 SF

500,000 to 900,000 SF

900,000 to 1,400,000 SF


10,000 SF to 500,000 SF

Manufacturing

Showroom

Food Processing/

StorageWarehouse/

Distribution

RENTABLE AREA

TOTAL: 43 M SF

Other/

Uncategorized

74%

17%

2%6% 1%

SUBMARKET 4: Downey, Paramount, Bellflower, Cerritos, Artesia, Lakewood, Norwalk

Del Amo Blvd

South St.

Rosecrans Ave.

Alondra Blvd.

5

605

91

PIONEER

GRIDLEY/183RD

BELLFLOWER

PARAMOUNT/

ROSECRANS

I-105/GREEN LINE

GARDENDALE


SUBMARKET 4: Downey, Paramount, Bellflower, Cerritos, Artesia, Lakewood, Norwalk

Submarket 4 contains fewer industrial properties than surrounding submarkets, the

majority of which are scattered throughout the submarket.


D. Paramount Industrial Area

D

B. Cerritos Industrial Parks

C. WSAB Corridor Industrial

C

B

Del Amo Blvd

South St.

Rosecrans Ave.

Alondra Blvd.

605

91

5

A

A. Downey Industrial Area

PIONEER

GRIDLEY/183RD

BELLFLOWER

PARAMOUNT/

ROSECRANS

I-105/GREEN LINE

GARDENDALE


Industrial rents in Submarket 4 did not fall as deeply as the Corridor average after the

Recession. Rents remained flat until 2014, but are now at their highest since 2007.



(2007-2016)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

(%

)

Avera

ge A

nnual R

ent PSF (

$)


Source: CoStar


Deliveries are virtually nonexistent since the Recession in Submarket 4. Periods of

substantial leasing activity in 2011 and 2014 have pushed vacancies to just 1.2%.



(2007-2016)

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

(%

)

Deliveri

es/

Abso

rption

(SF)


Source: CoStar


Average rents in Submarket 4 were stagnant following the Recession, but surges in

absorption in 2011 and 2014 have greatly enhanced rents and reduced vacancy.

• Vacancy is currently just above 1%, which is one of the lowest vacancy rates within the

Corridor. This has only been exacerbated by the fact that there have been virtually no new

deliveries of industrial space in the previous decade.

• There has been almost 2 million square feet of space leased since 2011. This high volume

of leasing activity indicates strong demand for spaces in the submarket that is likely to keep

vacancy rates low, especially as leasing activity has increased between 2015 and 2016,

despite rising rents.

• Although development pressure on industrial sites in this submarket is expected to

increase, it is likely to be tempered by the relatively newer stock of industrial buildings

in this submarket. The average age of industrial buildings in Submarket 4 is 46 years,

which suggests that while there are some opportunities for redevelopment, there are fewer

buildings that are due for major renovation or demolition than in the relatively older

Submarket 1 and 2.

• The lack of proximity of planned WSAB stations to major industrial clusters as well as

the dominance of warehousing and distribution uses in this submarket suggest limited

influence of the WSAB light rail on existing industrial users. Warehousing and distribution

uses generally support low employment densities, which means that potential ridership

supported by these industries would be low, and those who are employed in this clusters are

unlikely to find the light rail to be practical if driving is an affordable option.


Source: CoStar


RESIDENTIAL


Residential Key Findings

Residential Submarket Comparative Analysis

Residential Submarket Characterization








Residential | Market Overview

• The proportion of single family homes to multi-family homes tends to increase as

one moves south along the Corridor, with the highest number of single-family homes

found in Submarket 5.

• For-sale residential properties across the Corridor were impacted by the Great

Recession (2007-2012); Submarkets 1, 4, and 5 prices have generally recovered,

whereas properties in Submarkets 2 and 3 are still selling at prices that are below

the pre-recession peak.

• As observed in the other land uses, Submarket 1 (Downtown Los Angeles) is a major

outlier. Residential sale prices and rents are significantly higher than in other

submarkets within the Corridor.

• Residential rental vacancies are very low across the Corridor, with the exception of

Submarket 1, which has seen higher than usual vacancies due to a glut of new, high-

priced product flooding the market.

• Most submarkets, with the exception of Submarket 1, have seen limited construction

of new housing stock (for-rent or for-sale) in the past 10 years.


The Corridor contains approximately 293,000 housing units, with the greatest number found in

Submarket 3. The vast majority of housing in Submarket 1 is multi-family, whereas the proportion

of single-family homes generally grows as one moves south along the Corridor.


Distribution of Residential Inventory by Submarket

(2015, units)

9 K

48 K

40 K

59 K

25 K

8 K

43 K

33 K

27 K

SUBMARKET 1

SUBMARKET 2

SUBMARKET 3

SUBMARKET 4

SUBMARKET 5

Single-Family Multi-Family

25 K

18 K

91 K

73 K

86 K

TOTAL INVENTORY

(UNITS)*

*Figures may not sum precisely due to independent rounding.Source: American Community Survey (2011-2015)


Corridor Submarkets have similar rates of tenure for multi-family structures, with the majority

being renter-occupied. While Submarket 1 has the highest percentage of renter-occupied single

family units at 70%, Submarkets 2 and 3 also have a substantial share of renter-occupied homes.

SUBMARKET COMPARATIVE ANALYSIS | Tenure

Source: American Community Survey (2011-2015)

30%

50% 47%

72%77%

70%

50% 53%

28%23%

Submarket 1 Submarket 2 Submarket 3 Submarket 4 Submarket 5

Single Family Tenure(2015, %)

Owner-Occupied Renter-Occupied

13% 10% 7% 11% 14%

87% 90% 93% 89% 86%


Multifamily Tenure(2015, %)

Owner-Occupied Renter-Occupied


Submarkets 1 and 2 experienced the greatest amount of housing construction prior to 1940,

whereas the housing stock in Submarkets 3 - 5 was largely built between 1940 and 1989.

Submarket 1 contains the greatest share of residential units built since 1990.


Year Built of Residential Units by Submarket

(2015, SF)

Source: American Community Survey (2011-2015)

45%38%

19%

5% 6%

9%31%

45%

45% 42%

21%

20%29%

40% 46%

23%

9% 7% 10% 6%

1.66% 0.86% 0.19% 0.25% 0.16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Pre-1940 1940-1959 1960-1989 1990-2009 2010 - present


SUBMARKET COMPARATIVE ANALYSIS | For-Sale Performance Overview

For Sale | The greatest volume of residential sales are seen in Submarkets 4 and 5, while

Submarket 1 leads the Corridor in terms of average sales price.

Total Residential Sales and Average Sale Price (SF and MF homes)

Source: DQ News

Sales

(2016)

Avg. Median Sale

Price

(2016)

Total Sales

(2012-2016)

Sale Price Growth*

(2012-2016)


456 $624,372 2,627 14.79%

SUBMARKET 2Vernon, Commerce, Central

Alameda

193 $362,932 1,139 15.08%

SUBMARKET 3Maywood, Huntington Park,

South Gate, Bell, Bell

Gardens, Lynwood etc.

784 $363,428 4,524 12.60%

SUBMARKET 4Downey, Paramount,

Bellflower

1,270 $447,256 6,716 10.64%

SUBMARKET 5Cerritos, Artesia, Lakewood,

Norwalk

1,774 $494,962 8,870 10.74%


Source: DQ News

SUBMARKET COMPARATIVE ANALYSIS | Rental Performance Overview

0%

2%

4%

6%

8%

10%

12%

$-

$500

$1,000

$1,500

$2,000

$2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent per

Unit

Submarket 1 Rent Avg. Rent of Other Submarkets

Submarket 1 Vacancy Avg. Vacancy of Other Submarkets

Average Rent and Vacancy – Submarket 1 vs. Avg. of Other Submarkets

(2007-2016)

For Rent | Residential rents are significantly higher in Submarket 1 than the balance of the

Corridor. With a substantial dip in vacancies since 2009, rents throughout the Corridor have risen

steadily. A glut of new rental product in DTLA has created high vacancies of 10% in Submarket 1.


Inventory

(units)

Avg. Rent

(per unit)Avg. Vacancy


$2,215 10%

SUBMARKET 2Vernon, Commerce, Central

Alameda

$1,262 2%

SUBMARKET 3Maywood, Huntington Park, South

Gate, Bell, Bell Gardens, Lynwood

etc.

$987 3%


$1,336 3%

SUBMARKET 5Cerritos, Artesia, Lakewood,

Norwalk

$1,341 4%

SUBMARKET COMPARATIVE ANALYSIS | Rental Performance Overview

For Rent | With the exception of Submarket 1, residential rents within the Corridor are, on

average, between $1,000 to $1,300 per month per unit, and vacancy is very low.

Residential Rental Inventory, Average Rent, and Average Vacancy (2016)

26 K

3 K

21 K

20 K

15 K


Source: American Community Survey (2015) 5-Year Estimates

SUBMARKET 1 | Residential Inventory

There are approximately 25,000 housing units in Downtown LA (Submarket 1), only 1% of which

are single family homes. The majority of residential units were built before 1959, but Downtown

LA has had a resurgence and almost 25% of the stock was built in the last 25 years.

Single-Family, 1%

Multi-Family, 99%

Pre-1940, 45%

1940-1959, 9%

1960-1989, 21%

1990-2009, 23%

2010 -present, 2%

Submarket 1 Residential Inventory by Type

(2015)

Submarket 1 Residential Inventory

by Year Built

(2015)


Source: DQ News

SUBMARKET 1 | For-Sale Residential

Sale prices for for-sale residential product have rebounded and exceeded pre-Recession levels.

New homes, which tend to be luxury mid- or high-rise condominiums in this submarket, have

generally achieved higher prices than existing homes, though sales plummeted after 2007.*

$0 K

$500 K

$1 M

$2 M

$2 M

$3 M

$3 M

0

200

400

600

800

1,000

1,200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

Pri

ce

Num

ber

of

Units

Sold

Submarket 1 Median Sale Price – SF and MF Properties

Existing Sales New Sales Existing Prices New Prices

$0

*There were only 3 reported new homes sold in 2015 and 2016. The jump in median sale price is driven by a small number of very high

priced sales in 2015 and 2016.


SUBMARKET 1 | Rental Residential

Since 2014, nearly 5,500 new residential rental units have been delivered within Downtown LA;

deliveries have outpaced absorption, resulting in a sharp rise in vacancy.

Submarket 1 Residential Deliveries, Absorption, and Vacancy (all units)

(2007-2016)

0%

2%

4%

6%

8%

10%

12%

-

500

1,000

1,500

2,000

2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Deliveri

es/

Abso

rption (

units)


Source: CoStar



Average residential rents in Submarket 1 dipped only slightly during the Great Recession (2007-

2012), and have grown steadily since then, even as overall vacancy rose sharply in 2013.

Submarket 1 Average Residential Rent and Vacancy (all units)

(2007-2016)

0%

2%

4%

6%

8%

10%

12%

$0

$500

$1,000

$1,500

$2,000

$2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent Per

Un

it

Submarket 1 Submarket 1Rent Vacancy

Source: CoStar


A. 6AM, 6th and Alameda, Los Angeles (Arts

District)

C. AMP Lofts, 695 S Santa Fe Ave, Los Angeles

(Arts District)

B. Park Fifth, Olive and 5th Street, Los Angeles

(Financial District)

Since the recession, Downtown Los Angeles there has seen an influx of new mixed-use

properties that are generally high-end luxury units.

SUBMARKET 1 | Planned and Proposed Residential

SAMPLE PLANNED & PROPOSEDSUBMARKET 1: DOWNTOWN LOS ANGELES

5

10

UNION STATION

ARTS

DISTRICT

SOUTH PARK/

FASHON

DISTRICTLITTLE TOKYO

A

D

C

B

D. Perla on Broadway, 4th St and Broadway,

Los Angeles (Historic Core)

UNION

STATION

ARTS

DISTRICT

SOUTH

LITTLE TOKYO


Planned and proposed residential space primarily consists of high-rise lofts and for-

sale condominiums above commercial and amenity space. Much of the new

development will be the Financial District, Historic Core and South Park.


• 58 stories

• 1,305 rental apartments

• 431 condominiums

• Proposed

• 24 stories

• 313 residential units (for-sale condominiums)

• 7,000 SF of retail/restaurant space

• Under construction; expected delivery 2018

• 7 stories

• 320 residential units (live/work)

• 20,000 SF of commercial and other amenity space


• 35 stories

• 450 residential units (for-sale condominiums)


• Proposed; expected delivery 2020

B. Park Fifth, Olive and 5th Streets, Los Angeles

90017 (Financial District)

C. AMP Lofts, 695 S Santa Fe Ave, Los Angeles

90021 (Arts District)

D. Perla on Broadway, 4th St and Broadway,

Los Angeles 90013 (Historic Core)

SAMPLE OF PLANNED & PROPOSED

A. 6AM, 6th and Alameda, Los Angeles (Arts

District)


Submarket 1 is expected to continue leading the residential market within the Corridor

both in terms of sale prices and rental rates.


• Virtually all residential deliveries in this submarket have aimed at the top of market,

which has contributed to the much higher average rental rates and average sale prices

seen in this Submarket. This will likely continue to be the trend, as increasing land values

will necessitate these rental rates and sale prices to maintain acceptable developer profit

margins.

• Residential rental vacancy are the highest that they have been in the past decade, due

largely to a glut of new properties reaching the market within a short time span. This is

to be expected when so many units are introduced to a market, particularly when all of the

units are priced at the upper limit of what the market will bear, significantly limiting the

potential pool of renters. While short-term average rents may stabilize, and fairly generous

concessions are likely to be offered by landlords to accelerate leasing, vacancies are

expected to gradually decline as units are absorbed.




There are approximately 18,000 housing units in Submarket 2, 53% of which are single family

homes. The housing stock in this submarket tends to be older, with the vast majority of housing stock

being built before 1960; less than 10% of the overall housing stock was built after 1990.

Single-Family, 53%

Multi-Family, 47%

Pre-1940, 38%

1940-1959, 31%

1960-1989, 20%

1990-2009, 9%

2010 -present, 0.9%


(2015)


by Year Built

(2015)


$ K

$50 K

$100 K

$150 K

$200 K

$250 K

$300 K

$350 K

$400 K

$450 K

$500 K

0

200

400

600

800

1,000

1,200

1,400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

s Pri

ce

Num

ber

of

Units

Sold

Submarket 2 Median Sale Price – New vs. Existing (2007-2016)


Source: DQ News


$0

Median home sale prices in Submarket 2 declined sharply following the Recession. Prices have

increased substantially since 2012, but have not fully recovered. Home sales declined substantially

since 2009 and remain low.


Source: DQ News


Single-family home prices have largely tracked with multi-family prices in Submarket 2, but the

there have been very few multi-family homes in the last 10 years.

$0 K

$50 K

$100 K

$150 K

$200 K

$250 K

$300 K

$350 K

$400 K

$450 K

$500 K

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

s Pri

ce

Num

ber

of

Units

Sold

Submarket 2 Median Sale Price – Single Family vs. Multi-Family (2007-2016)

Single Family Sales Multi-Family Sales Single Family Sales Price Multi-Family Sales Price



There have been very limited rental unit deliveries in Submarket 2 over the past ten years, which

has contributed to a decline in vacancy from 6% in 2009 to just above 2% in 2016.


(2007-2016)

-4%

-2%

0%

2%

4%

6%

8%

(100)

(50)

-

50

100

150

200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Deliveri

es/

Abso

rption (

units)


Source: CoStar



Average residential rents in Submarket 2 hovered at approximately $1,000 per unit through

2015, and has jumped to approximately $1,260 in 2016 as vacancy reached a record low.


(2007-2016)

0%

1%

2%

3%

4%

5%

6%

7%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent (P

er

Un

it)

Average Rent Average VacancySource: CoStar


Residential sale prices and rents in Submarket 2 are the weakest within the Corridor, but

strong sales price growth and very low rental vacancies suggest increasing market

pressure.


• Sale prices have grown by approximately 15% from 2012 to 2016, which is the

strongest growth rate within the Corridor. Even so, average median sale prices in 2016

were still the lowest in the Corridor, albeit only marginally behind Submarket 3. This

suggests that properties in Submarket 2 are seen as increasingly desirable, and upward

pressure on home prices may continue to build.

• Residential rental vacancies have dropped from just over 6% in 2009 to just over 2% in

2016, which is the lowest in the Corridor. This has led to a gradual increase in rents over

the past several years. Interest in rental properties in this area is likely to continue, as rents

are still relatively affordable for a substantial segment of the population.

• There are no significant planned or proposed developments in this submarket.

Development activity has been concentrated in Downtown Los Angeles, in Submarket 1,

where developers can aim for more optimistic rents and sale prices.

• The long-term residential development potential of this submarket is limited by a

scarcity of available land, but redevelopment of underutilized retail and potentially

some industrial parcels is a possibility. As development pressure increases, multi-family

may also look to renovate older multi-family rentals.





homes. Similar to Submarket 2, approximately 70% of all housing units were built prior to 1960,

and less than 10% of all units were built after 1990.

Single-Family, 53%

Multi-Family, 47%

Pre-1940, 19%

1940-1959, 45%

1960-1989, 29%

1990-2009, 7%

2010 -present, 0.2%


(2015)


by Year Built

(2015)


$ K

$100 K

$200 K

$300 K

$400 K

$500 K

$600 K

0

200

400

600

800

1,000

1,200

1,400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

s Pri

ce

Num

ber

of

Units

Sold



Source: DQ News


$0

Submarket 3 prices dropped greatly during the recession, and recovery has been slow. Notably,

the price of existing homes surpassed that of new homes, which may indicate misalignment

between market demand and what the limited number of new developments are offering.


Source: DQ News


Although both single family and multi-family homes in Submarket 3 have recovered at similar

rates from the Great Recession (2007-2012), single-family homes have sold at a steady premium

and at a far higher rate.

$0 K

$50 K

$100 K

$150 K

$200 K

$250 K

$300 K

$350 K

$400 K

$450 K

$500 K

0

200

400

600

800

1,000

1,200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

s Pri

ce

Num

ber

of

Units

Sold





Approximately 700 new rental units were constructed in Submarket 3 since 2007, and all were

absorbed within the year in which they were delivered. This, in addition to low vacancy rates year

after year, is consistent with the rest of Corridor and suggests high demand for rental units.


(2007-2016)

-4%

-2%

0%

2%

4%

6%

(200)

(150)

(100)

(50)

-

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Num

ber

of

Units


Source: CoStar



After a major dip after 2008, rental rates increased quickly to surpass pre-Recession levels.

However, compared to other submarkets, Submarket 3’s average rents are still relatively low.


(2007-2016)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

$800

$820

$840

$860

$880

$900

$920

$940

$960

$980

$1,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent (P

er

Un

it)



Submarket 3 housing continues to be relatively affordable, despite strong sale price

growth and low rental vacancies.


• Despite strong sales price growth of 12% between 2012 to 2016, average median sale

price is approximately $363,000, which is still lower than the pre-Recession peak. This

suggests that the submarket will continue to be an attractive market for first-time

homebuyers seeking more affordable options that are still proximate to Downtown LA.

• Residential rental vacancies have remained under 5% for the past several decades,

suggesting that Submarket 3 has been and will continue to be a popular rental market. This

is underscored by the fact that the approximately 700 new rental units delivered since

2013 were leased up completely within 1 year of delivery.

• Despite the fact that demand seems to be high, average rental rates are substantially

lower than the other Corridor submarkets. This suggests a significant proportion of the rental

housing stock is out-of-date or is of lower quality. New properties may be able to support

higher rents, particularly with the development of WSAB.

• There are no significant planned or proposed developments in this submarket.





homes. The housing stock in this submarket tends to be older, with approximately 70% of all units

built prior to 1960. Less than 1% of all units were built since 1990.

Single-Family, 55%

Multi-Family, 45%

Pre-1940, 5%

1940-1959, 45%

1960-1989, 40%

1990-2009, 10%

2010 -present, 0.3%


(2015)


by Year Built

(2015)


$0 K

$100 K

$200 K

$300 K

$400 K

$500 K

$600 K

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

Pri

ce

Num

ber

of

Units

Sold



Source: DQ News


Annual sales volume of existing homes in Submarket 4 have gradually declined since 2009, while

sales of new homes have remained under 100 per year. Excluding Submarket 1, Submarket 4

has the second highest homes sales price in the Corridor.

$0


Source: DQ News


In Submarket 4, single family homes achieve significantly higher prices than multi-family homes.

Annual volume of multi-family sales has remained remarkably steady since 2007, whereas single

family home sales have gradually slowed since 2009.

$0 K

$100 K

$200 K

$300 K

$400 K

$500 K

$600 K

0

200

400

600

800

1,000

1,200

1,400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

Pri

ce

Num

ber

of

Units

Sold





Submarket 4 has seen very few rental residential deliveries since 2008, but vacancy has

remained low.


(2007-2016)

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

(100)

(50)

-

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Deliveri

es/

Abso

rption (

units)


Source: CoStar



Submarket 4 was barely affected by the Great Recession (2007-2012). Average rental rates

decreased only slightly following 2008, and they have been increasing gradually ever since,

exceeding 2007 values.


(2007-2016)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent per

Unit



A. South Downey Condos,10361 Foster Rd.,

Downey 90242

New residential development in Submarket 4 is limited. Most of the proposed space

includes townhome and condominium developments in Downey.

SUBMARKET 4 | Recent, Planned and Proposed Residential


BELLFLOWER

A

605

5

B

Rosecrans Ave

105I-105/ GREEN LINE

GARDENDALE

710

PARAMOUNT/

ROSECRANS

Alondra Blvd.

Bellflo

wer B

lvd.

B. 8603 Imperial Hwy, 8603 Imperial Hwy,

Downey 90242

RECENT, PLANNED & PROPOSED

C. High Pointe Townhomes, 7940 Telegraph

Rd., Downey 90242

D. Centerpointe,10716 Paramount Blvd.,

Downey 90242

C

D


B. 8603 Imperial Hwy, 8603 Imperial Hwy,

Downey 90242

A. South Downey Condos,10361 Foster Rd.,

Downey 90242

Recent, planned, and proposed residential developments in this submarket tend to be

smaller scale.

SUBMARKET 4 | Recent, Planned and Proposed Residential

• 2 stories

• 14 condominiums

• Proposed; expected delivery TBD

• 2 stories

• 4 townhomes


SAMPLE OF RECENT, PLANNED & PROPOSED

C. High Pointe Townhomes, 7940 Telegraph

Rd., Downey 90242

D. Centerpointe,10716 Paramount Blvd.,

Downey 90242

• 3 stories

• 39 townhomes


• 3 stories

• Townhomes; 3 residence available

• Available now


Submarket 4 sale prices have largely recovered from the Great Recession (2007-2012),

but rents have grown at limited rate since 2008.


• Despite lagging sales volume, single family homes are the clear winner in this

submarket when considering average sales price alone.

• Deliveries of rental apartments peaked during the Recession, coinciding with a period

of negative absorption. Absorption did not swing back up until 2013, after which the

vacancy rate finally began to move gradually downward. While there has been some

fluctuation, vacancy rates have been below 4% since 2012 indicating a fairly high demand

for residential product.

• Recent, planned and proposed major developments have been limited, and tend to be

for-sale condominiums.

• Overall demand for housing remains strong throughout in Los Angeles County; the

improved access the WSAB light rails provides to employment centers like LAX and

Downtown LA makes multi-family development near station areas a strong opportunity.




The housing stock in Submarket 5 is predominantly single-family and relatively new compared to

other submarkets in the Corridor, with more than half built after 1959.

Single-Family, 69%

Multi-Family, 31%

Pre-1940, 6%

1940-1959, 42%

1960-1989, 46%

1990-2009, 6%

2010 - present, 0.2%


(2015)


by Year Built

(2015)


$0 K

$100 K

$200 K

$300 K

$400 K

$500 K

$600 K

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

Pri

ce

Num

ber

of

Units

Sold



Source: DQ News


Submarket 5 also performed well through the past 10 years. While there was a dip in prices

2009 - 2012, prices have returned to pre-recession highs. Existing homes prices were even with

the limited new home sales in 2016, which may be reflective of the quality or size new homes sold.

$0


Source: DQ News


Single family homes in Submarket 5 also maintain a significant price premium over multi-family

homes, though this likely reflective of the relatively higher quality of the single family housing

stock.

$0 K

$100 K

$200 K

$300 K

$400 K

$500 K

$600 K

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Media

n S

ale

Pri

ce

Num

ber

of

Units

Sold





Years of negative rental residential absorption during the recession drove vacancy in Submarket

5 to a peak of approximately 5%, but since then, vacancy has decreased back below 4%, with

only a slight uptick in 2016 due to the delivery of approximately 200 new units.


(2007-2016)

-4%

-2%

0%

2%

4%

6%

(150)

(100)

(50)

-

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Vaca

ncy

Deliveri

es/

Abso

rption (

units)


Source: CoStar



Average rental rates in Submarket 5 remained remarkably stable through 2013, at which point

average rents began rising to just under $1,400 per month.


(2007-2016)

0%

1%

2%

3%

4%

5%

6%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avera

ge V

aca

ncy

Avera

ge R

ent per

Unit



Upcoming residential development in Submarket 5 primarily consists of luxury multi-

family unit apartment and townhome developments.



PIONEERGRIDLEY/

183RD

South St.

Rosecrans Ave.

A

91

B

605

5

Alondra Blvd.

C

A. Artesia Live (Phase II), 18600 Gridley Rd,

Artesia 90701

D. Castella Townhomes, Studebaker and

Excelsior, Norwalk 90650

B. Villa Madrid, 20937 Bloomfield Ave,

Lakewood 90715

C. Sage at Cerritos, 12651 Artesia Blvd,

Cerritos 90703

D

SAMPLE PLANNED & PROPOSED


D. Castella Townhomes, Studebaker and

Excelsior, Norwalk 90650C. Sage at Cerritos, 12651 Artesia Blvd,

Cerritos 90703

B. Villa Madrid, 20937 Bloomfield Ave,

Lakewood 90715

A. Artesia Live (Phase II),18600 Gridley Rd,

Artesia 90701

Planned, proposed, or recently developed residential properties in Submarket 5 tend be

at least 2 stories.


• 24,000 SF (7 stories)

• 130 residential units

• 24,000 SF of commercial and amenity space


• 12,000 SF (2 stories)

• 22 residential units (low-rise condominiums)


• Proposed; expected delivery 2018

• 46,000 SF (4 stories)

• 132 residential units (luxury apartment)


• 1,100 to 1,500 SF (each townhome)

• 21 townhomes

• Construction complete; expected delivery 2018

SAMPLE OF PLANNED & PROPOSED


Submarket 5 achieves the highest average sale prices and rental rates in the Corridor

outside of Downtown LA.


• For-sale performance is very strong; not only are average sale prices higher here than

in any other submarket outside of Submarket 1, sales volume has also been

disproportionately brisk. Submarket 5 is has approximately 5,000 fewer residential units

than Submarket 3, but it registered over 4,000 more sales between 2012 and 2016.

• As with other Submarkets outside of Submarkets 1 and 2, single-family homes maintain

a substantial premium over multi-family homes. However, multi-family for-sale product

can still be a strong opportunity within close proximity to future WSAB stations.

• While this submarket is dominated by single-family homes, the rental market is strong,

and some of the most expensive apartments are proximate to proposed WSAB stations.

This indicates a the likelihood of support for more multi-family rental product within station

areas.

• Recent, planned, and proposed projects are in greater supply in Submarket 5 than most

other Corridor submarkets, with projects tending to be luxury rentals and townhomes.

Artesia Live (Phase II), for example, is expected to bring 130 luxury apartments and

24,000 square feet of ground floor retail to a site that is proximate to the proposed

Pioneer Station.

August 24, 2018 - Appendix A-5: Real Estate Market Scan...

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